The ability to perform due diligence efficiently is a vital element of the M&A process. Having a solid understanding of the most frequent questions and answers regarding due diligence will ensure that you can determine the potential risks and make a sound investment.
What are your strategies to address any discrepancies that occur in the course of due diligence?
The interviewer is looking for what you would do in when there is a discrepancy between public records and internal documents. They want to know your ability to spot the issue, conduct the required research, and take action to resolve it. This question tests your focus for detail and your ability under pressure.
How can you judge the quality of the financial data for a company?
The purpose of the buy-side is to determine whether the company you are considering buying from is able to generate enough revenue to pay off its debt and other obligations. This is done by analysing the cash flows of a business and comparing them to the cash flows of its competitors. It is essential to understand the company’s assets (accounts receivable and inventory) and liabilities (accrued payroll as well as accounts payable and accrued interest).
What steps do you take to safeguard confidential information when conducting a due diligence?