When entering a company, investors are primarily interested in the product and its possibilities on the market. At the same time, however, they assess other parameters on the basis of which they will consider an investment, its amount, business share, appreciation, timeframe and all risks associated with it. That will primarily be the company’s financial situation, both current and historical.
However, financial statements provide a limited and incomplete view of a company’s financial health. Therefore, investors usually engage financial analysts to carry out an in-depth analysis of the company – i.e. due diligence. Depending on the size of the company and its requirements, financial, tax and legal analyses are most commonly carried out, as is an operational analysis, which thoroughly examines operating and capital costs, business processes and bottlenecks within them, related risks and business development opportunities arising from them.
The objective is to obtain the most accurate picture of the company’s condition and potential risks in the individual analysed areas. The basis of every financial and tax due diligence is accounting as well as other basic documentation. Non-financial documents include documents such as partnership agreements, decisions of general meetings, loan documentation, lease contracts, customer and supplier agreements, project documentation, financial and business plans, auditors’ reports, etc. If the company has this documentation in a complete, clear and accessible form, the entire due-diligence process will be accelerated significantly.
Presentation and being prepared to answer questions will play a key role in the investor’s decision-making. One possibility for managing this process is to work with experienced specialists from professional investment platforms who are able to thoroughly prepare companies and their founders for investment.
The most interesting criteria for investors in assessing a project:
This article was created in cooperation with the consulting and auditing company for the Investment in Business series of the economic daily Hospodárske noviny: https://hnonline.sk/prakticke-hn/2130115-maly-gazda-ide-do-sveta