Examination of previous statements, comprehensive trial balances, general ledgers, current operational results, business plans, budgets, and expected financial information to help confirm the seller’s economic performance. The goal is to find unreported obligations, comprehend the target’s existing financial situation, and determine whether or not earnings are sustainable. These activities aid in determining a reasonable target valuation and justifying the acquisition price.
At the same time, analysis the target company’s systems and procedures helps uncover the business functions performance risks. Investors need to evaluate the performance of the target’s operational model, which includes sales, marketing, technology, supply chain, and manufacturing, to identify gaps and prospective areas for investment or development.