How to investigate a business

People sell businesses for lots of reasons. The only thing for certain is that you won’t know what you have bought until after you have bought it.
 

Which is why accountants make a lot of money out of due diligence work to provide some assurance that there aren’t too many skeletons in the cupboard.
 

So, here’s the funny thing. I’ve heard many FDs over the years tell me how they have told stories to auditors who have believed every word. Yet when it comes to spending hundreds of thousands of pounds on buying a business, who do we send in to check out the company?
 

That doesn’t mean, it is not worthwhile, and having a signed opinion can facilitate funding. However, sending in an experienced FD first can be very worthwhile. After all, it’s what large companies do.
 

You FD will know how finance departments tick and will be able to assess how the systems and processes work and how the information is used by the business. They’ll review the management accounts and ask questions about the business to get a different perspective on the finances to the auditors.
 

As I moved from the profession to industry, I realised that being an FD was a different job to being an audit partner. Both are highly skilled and qualified roles and each has their part to play in an acquisition.