HMC Business Consulting, LLC

Herbert M. Chain, MBA, CPA

Independent Director, Audit Committee Chair, SOX Financial Expert, Accounting and Auditing Professional, Professor,  Consultant

Sound advice based on experience

Financial Due Diligence Services

Due diligence is all about risk - its identification and mitigation. If risks are not identified, then they cannot be assessed or factored into a cost/benefit analysis. And even if identified, if the risks cannot be mitigated, then management must develop responses...or walk away from the transaction or deal. It is this "unknown unknown" that amplifies risk and exposure.

Studies, and my experience, have shown that lack, or ineffective, due diligence can be a principal factor in the failure of transactions and deals. For this reason, acquirers add professionals to their deal team to perform due diligence on targets. These questions are among those that should be asked:

  • What assets are recorded that shouldn't be?
  • Are recorded values appropriate?
  • Are there soft assets? Are there aged receivables and/or inventory, for example?
  • What liabilities have been omitted from the accounting records?
  • How are contingencies being handled and assessed? Have all been captured?
  • How rigorous is the target's budgeting and projection processes? What are the sensitivities of the assumptions?

If these questions are not asked (and answered), you are increasing your risk of acquisition failure. I can assist your team in a cost-effective manner to put a "corral" around the risks.