Financial Due Diligence
Financial due diligence is the rigorous investigation of a company's financial position — assessing the quality of its earnings, the sustainability of its cash flows, and the reliability of the financial information presented to buyers, investors, or lenders.
It transforms raw accounting data into actionable intelligence: confirming what the numbers say, uncovering what they conceal, and quantifying the adjustments that determine the real value of the transaction.
What is financial due diligence?
Financial due diligence is the structured process through which a buyer, investor, or lender independently verifies a company's financial health before committing to a transaction. It goes well beyond auditing historical accounts — it assesses the quality and recurrence of earnings, normalises EBITDA for non-recurring items, reviews working capital requirements, and stress-tests the business plan assumptions.
The objective is twofold: validate the reliability of the financial information provided by the seller, and identify risks, adjustments, or red flags that may affect valuation, transaction structure, or post-closing protections.
STEP 1
Vision and Planning
Define the rationale, objectives, scope and schedule of the mission.
STEP 2
Information Gathering
Gather and structure the data required for analysis.
STEP 3
Performance and Situation
Evaluate past performance and current financial situation.
STEP 4
Reliability of the forecasts
Test the consistency and robustness of the projections.
STEP 5
Risks and Performance
Prioritize risks and value performance levers.
STEP 6
Analysis and Decision
Present the findings and their implications.
When and why should financial due diligence be carried out?
Before an acquisition
An purchaser carries out financial due diligence to ensure that the financial statements accurately reflect the economic reality of the target. The objective is to verify real profitability, debt level, working capital risks and validate valuation hypotheses before formulating a firm offer.
Before a transfer
The seller mandates financial due diligence prior to the transaction in order to anticipate questions from buyers and secure the sales process. This verification makes it possible to identify sensitive points, to make the aggregates communicated reliable and to reinforce the credibility of the transfer file.
fundraiser
A start-up or an SME wishing to open its capital to investors must provide
clear and audited financial information. Here, you have to give confidence to investors,
demonstrate financial control and facilitate the negotiation of shareholders' agreements.
Restructuring & Refinancing
When a company goes through a period of instability or renegotiates its debts, financial due diligence may be required by creditors or shareholders in order to assess the viability of the recovery plan and to measure the repayment capacity.
Before an IPO
Market authorities and investors expect full transparency before a company is admitted to a regulated market in order to ensure the reliability of historical and forecast data communicated to the market.
Entry/exit of a shareholder
Highlight non-recurring and seasonal elements to strengthen the reliability of the conclusions and strengthen the transparency of the analysis.
Our financial due diligence methodology
A structured, independent approach to financial analysis — delivering conclusions that withstand buyer, lender, and auditor scrutiny.
Key adjustments and areas of vigilance include:
- A structured, independent approach to financial analysis
We reconstruct reported EBITDA into a normalised, recurring earnings figure by identifying and removing non-recurring items — one-off revenues, exceptional charges, management adjustments, and accounting discretionary choices — to arrive at a maintainable EBITDA that reflects true economic performance.
- Scope and consolidation review
We verify the exact perimeter of the financial analysis — identifying entities, subsidiaries, or business lines to include or exclude — and ensure that historical financials reflect the correct consolidation scope for the transaction. - Working capital and net debt assessment
We analyse the normalised level of working capital required to run the business, identify seasonality patterns and structural trends, and review the completeness of net debt items — including off-balance-sheet liabilities, earn-out obligations, pension commitments, and lease adjustments. - Accounting framework and restatement analysis
We compare local accounting standards (Swiss GAAP RPC, French GAAP) with IFRS where applicable, identify material differences affecting equity or reported results, and restate key financial aggregates to ensure comparability across periods and between entities. - Business plan review and assumption validation
We assess the credibility of management projections, stress-test the key assumptions driving revenue growth and margin evolution, and quantify the sensitivity of enterprise value to scenario variations. - Red flags and risk reporting
We identify and communicate material findings — concentration risks, undisclosed liabilities, related-party transactions, covenant breaches, or accounting irregularities — immediately, without waiting for the final report, enabling real-time decision-making.
Diverse range of clients advised
Family Offices
Executives/Management
Family shareholders
Private equity funds
Family businesses
SMES
operations analyzed
years of expertise
clients advised
Discover our TRACK RECORD
The transactions presented were carried out by, with the contribution of, or with the participation of members of the Hectelion team in the context of functions performed currently or previously.
Frequently Asked Questions
- Accountant : checks the compliance of the accounts;
- Financial : assesses real performance, cash flow, restatements
At Hectelion, we favor a value-oriented due diligence. That means we don't just check the numbers. It is an approach that is more strategic and economic than purely accounting.
To identify financial, accounting and fiscal risks before signing and to adjust the purchase price.
The buy-side aims to secure the purchaser, the sell-side prepares the company for sale by anticipating sensitive points.
Historical financial statements, profitability, cash flow, debt, commitments and the quality of the result.
Between 3 and 6 weeks depending on the size, complexity and availability of the data.
Adjustments to working capital, net debt or non-recurring items directly influence enterprise value.
Unaudited figures, insufficient provisions, WCR inconsistencies or poorly documented restatements.
No It also includes the analysis of accounting processes, key contracts, and internal control.
The first assesses financial performance and structure, the second identifies potential tax risks.
To ensure the neutrality of the analysis, the conformity of the report and the reliability of the conclusions.