Buy-Side Due Diligence
For acquirers and strategic buyers evaluating targets
Buy-side FDD is commissioned by the acquirer to independently verify the target company's financial health before committing capital. We identify risks, validate reported earnings, assess working capital adequacy, and uncover hidden liabilities — giving you the confidence to negotiate from a position of knowledge.
Who Is This For
Strategic acquirers, PE/VC funds making direct investments, companies evaluating bolt-on acquisitions, and family offices assessing operating businesses.
Scope of Work
- Quality of Earnings — normalized EBITDA after adjusting for one-time items, owner add-backs, and accounting policy differences
- Working Capital Analysis — assessment of normalized working capital levels, seasonality adjustments, and target vs actual working capital for SPA mechanisms
- Net Debt & Debt-like Items — identification of all debt, quasi-debt, capex commitments, and off-balance-sheet obligations
- Related-Party Transactions — review of all RPTs for arm's length pricing and potential profit/loss distortions
Detailed Scope
What We Cover
Quality of Earnings — normalized EBITDA after adjusting for one-time items, owner add-backs, and accounting policy differences
Working Capital Analysis — assessment of normalized working capital levels, seasonality adjustments, and target vs actual working capital for SPA mechanisms
Net Debt & Debt-like Items — identification of all debt, quasi-debt, capex commitments, and off-balance-sheet obligations
Related-Party Transactions — review of all RPTs for arm's length pricing and potential profit/loss distortions
Tax Risk Assessment — pending tax demands, transfer pricing exposures, and contingent tax liabilities
Revenue Quality — customer concentration, contract analysis, revenue recognition policy review, and sustainability of revenue streams
How It Works
Our Process
Scope Definition & Data Room Setup
Define FDD scope based on deal context, set up secure virtual data room, and issue information request list (IRL) to the target company.
Financial Deep-Dive
Analyze 3-5 years of financial statements, management accounts, trial balances, bank statements, and supporting schedules. Identify trends, anomalies, and areas requiring further investigation.
Management Meetings & Verification
Conduct structured interviews with the target's management team, finance head, and auditors. Verify key assumptions and reconcile any discrepancies found during analysis.
FDD Report & Deal Support
Deliver comprehensive buy-side FDD report with executive summary, normalized EBITDA bridge, working capital analysis, net debt schedule, red flags, and recommendations for SPA protections.
Proven Results
Case Studies
PE Fund Acquiring a Mid-Size FMCG Company (Rs 60 Cr Revenue)
Challenge
A PE fund was evaluating the acquisition of a family-run FMCG company with reported EBITDA of Rs 9 crore. The company had complex related-party structures (3 group entities), and the PE fund needed independent verification of earnings quality before committing Rs 45 crore.
Our Solution
Conducted 3-week buy-side FDD covering quality of earnings (adjusting for owner personal expenses routed through the company, above-market rent to promoter-owned property, and one-time government incentive income), working capital normalization, net debt computation including unpaid statutory dues, and tax risk assessment for pending GST demands.
Result
Normalized EBITDA determined at Rs 7.1 crore — 21% lower than reported — after adjusting for Rs 1.2 crore in promoter-related expenses and Rs 70 lakh in non-recurring income. Identified Rs 45 lakh in undisclosed statutory dues. PE fund renegotiated entry valuation from 6.5x to 5.8x EBITDA based on FDD findings.
Strategic Acquirer — Manufacturing Company Acquisition
Challenge
A listed manufacturing company was acquiring a competitor to expand capacity. The target had Rs 85 crore revenue but inconsistent margins across years (ranging from 8% to 15%), raising questions about earnings sustainability. The acquirer needed FDD completed within 2 weeks due to deal timeline pressure.
Our Solution
Fast-tracked buy-side FDD focusing on margin volatility analysis, raw material cost pass-through mechanisms, customer contract terms, and inventory valuation methodology. Conducted management interviews to understand margin drivers and verified against supporting documents.
Result
Identified that high-margin years were driven by a one-time contract with above-market pricing that had since expired. Sustainable EBITDA margin determined at 9.5% (vs reported 13% for the latest year). Working capital requirement was Rs 2.8 crore higher than presented due to aging receivables. Acquirer adjusted the offer price accordingly.
Disclaimer: As per the guidelines of the Institute of Chartered Accountants of India (ICAI), the names of clients cannot be disclosed. The case studies presented above are based on actual engagements, with client identities anonymized to comply with ICAI professional standards and maintain confidentiality.
Common Questions
Frequently Asked Questions
Typically 2-4 weeks. For smaller targets (under Rs 50 crore revenue), 2 weeks is usually sufficient. For larger or multi-entity targets, 3-4 weeks may be needed. We can fast-track to 10 working days in time-sensitive deal situations.
Explore More
Other FDD Services
Sell-Side (Vendor) Due Diligence
For sellers and promoters preparing for exit or fundraise
Sell-side or vendor due diligence is commissioned by the seller before approaching buyers or investors. It proactively identifies and addresses issues that would otherwise surface during buyer's DD, accelerates the deal process, maintains seller credibility, and provides a vendor DD report that can be shared with multiple potential buyers simultaneously.
View DetailsInvestor Due Diligence
For PE/VC funds, family offices, and angel investors evaluating opportunities
Investor DD is tailored for PE/VC funds, family offices, and institutional investors who need a thorough but stage-appropriate financial assessment of potential investments. Unlike traditional buy-side DD (which assumes control acquisition), investor DD focuses on minority protection, governance risks, fund deployment safeguards, and portfolio-level considerations.
View DetailsNeed Buy-Side Due Diligence?
Get a free consultation with our FDD specialists to discuss your specific deal requirements and timeline.