Acquisition diligence
Acquisition financial analysis: services, software and deliverables
Choose acquisition financial analysis services and supporting software by understanding financial diligence, earnings adjustments, valuation and financing.
An acquisition financial analysis service helps a buyer investigate the financial questions behind a proposed purchase. Financial due diligence and quality-of-earnings work can examine historical performance, proposed earnings adjustments, working capital and obligations that affect the transaction. The engagement should identify which questions the adviser will answer and what evidence is available.
Supporting software has a different role: organizing financial documents, connecting analysis to sources and making the work easier to review. Buyers may need both a professional engagement and an analysis workspace. Choosing either becomes easier when the required deliverables are clear.
Start with the decision the analysis must support
A buyer assessing a target's earnings needs different work from a team negotiating a working-capital mechanism or preparing an acquisition financing request. Agree on the entities, periods and questions in scope, the information the seller will supply, and the intended users of the findings.
BDO's transaction-services description includes earnings quality, normalization of EBITDA or EBIT, debt-like items, working capital and forecast analysis among its buy-side considerations. Those are useful examples for a scope discussion, rather than a universal package every engagement includes. RSM likewise describes financial diligence as work that can inform transaction structure and challenge valuation assumptions.
Separate diligence, valuation and financing
These analyses inform one another, but each answers a distinct question. A favorable earnings review does not determine a purchase price or establish that a proposed debt structure is affordable. Ask who is responsible for each output and how findings flow between them.
| Deliverable | Main question | What the buyer should request |
|---|---|---|
| Financial due diligence or quality of earnings | What supports the target's reported performance? | Findings, adjustments, supporting evidence and unresolved matters |
| Working-capital and net-debt analysis | Which balance-sheet items affect the transaction economics? | Defined scope, period analysis and treatment of disputed items |
| Valuation | What is the business worth for the stated purpose? | Valuation date, methods, assumptions and responsible specialist |
| Acquisition financing model | How would the proposed funding structure use and generate cash? | Sources and uses, payment assumptions, liquidity and downside cases |
| Financial analysis workspace | Can the team inspect and reuse the supporting analysis? | Source references, visible adjustments, review context and report outputs |
Prepare a financial record the adviser can interrogate
Begin with the records relevant to the agreed scope: historical and interim statements, tax returns where useful, debt schedules, receivables and payables detail, management forecasts and supporting schedules. Contracts or other documents may be needed to interpret a material revenue stream or obligation. The adviser and lender should determine the final request list for the transaction.
Keep each entity and period identifiable. A year-to-date result should not quietly become a full-year result, and a management forecast should remain visibly separate from actual performance. Track missing information and conflicting versions so the adviser can explain how they affect the work.
Give earnings adjustments a reviewable explanation
A proposed adjustment needs more than a label such as nonrecurring. Ask what happened, which period includes it, whether the cost or benefit may continue, and what supports the amount. Keep management's proposal distinguishable from the diligence team's conclusion.
For example, a seller may propose adding back an expense because it arose during an unusual event. The buyer still needs to understand whether any related cost will continue after closing and whether the evidence supports the amount. The useful deliverable is the adjustment together with its reasoning and unresolved questions, so its effect on the transaction can be discussed.
Questions to ask an acquisition analysis provider
Ask who performs the work and who reviews it, what the engagement covers, and what would require additional work. Establish how the team will handle missing records, disagreements with management and findings that emerge late in the process. Discuss the intended report users and any reliance restrictions with the provider before the work begins.
Ask to see an appropriately anonymized deliverable. Look for a clear connection between findings, supporting schedules and material limitations. A schedule that explains an earnings adjustment or a working-capital issue can be more useful for a transaction discussion than a long report that leaves the supporting reasoning unclear.
Evaluate software with a real review question
Choose a figure your team understands, find its source and follow it into a financial comparison or adjusted measure. Then ask a second reviewer to repeat that path. Inspect how an analyst change is identified and how a question about the figure remains connected to the analysis.
Check the handoff to the deliverable as well. Can the relevant exhibit be used in the report format your team needs? What context remains with an export, and what requires access to the workspace? These are practical selection tests. They do not replace the professional judgment or scope of a financial diligence engagement.
Where SpreadSpace supports acquisition analysis
SpreadSpace gives transaction teams a workspace for financial document review, source-linked analysis and analyst-reviewed earnings adjustments. Teams can inspect contributing rows, prepare financial exhibits and bring them into their firm's report or memo format. Shared review keeps the discussion close to the figures being examined.
Use it to support the analysis performed by your deal team or adviser. Bring a representative target's financial packet and one earnings adjustment, then follow that adjustment through the supporting documents, analysis and report exhibit. The professional engagement determines the diligence conclusions and their intended use.
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