BUY-SIDE TRANSACTION ADVISORY

Financial & Tax Due Diligence Services in India

Know exactly what you are buying or investing in. Our financial due diligence services help investors and acquirers test earnings quality, working capital, net debt, accounting policies and controls, and identify direct and indirect tax exposures, so you can negotiate price and protections with confidence.

2core diligence streams: financial and tax
7financial review areas in every engagement
30+countries our clients come from
426client engagements completed in the last 5 years
01

What Is Financial Due Diligence?

Financial due diligence is an in-depth evaluation of a company's financial position, performance and financial management systems, carried out before an acquisition or investment.

It includes a detailed review of the company's financial statements, internal control systems and document flows. It also covers management reporting data, such as information on assets and liabilities, the structure of expenses, and profits from core activities. Our financial due diligence helps potential buyers and investors understand the factors that have driven past performance, and those that will shape future results.

02

Scope of Our Financial Due Diligence

1

Quality of Earnings

  • Analysis of financial and operational performance
  • Review of management's reported or proposed EBITDA
  • Normalisation for one-off and non-recurring items
  • Revenue and cost structure analysis
2

Assets & Liabilities

  • Structure, availability and value of current and non-current assets
  • Condition and quality of assets
  • Checks for overstated inventory, fixed assets or receivables
  • Checks for understated payables and provisions
3

Working Capital

  • Operating cash cycle and past working capital trends
  • Receivables and payables ageing, and overdue periods
  • Normalised working capital for price mechanisms
4

Net Debt & Cash Flow

  • Debt and debt-like items
  • Monitoring of crucial cash flow areas
  • Cash conversion and the reliability of cash flow
  • Financial independence and solvency
5

Related Parties

  • Review of related party transactions and balances
  • Arm's-length terms and continuity after the deal
6

Accounting Policies & Controls

  • Assessment of accounting policies adopted
  • Cost and management accounting systems
  • Correctness and reliability of financial statements
  • Year-on-year balance sheet comparisons, with unusual variances investigated
7

Projections & Risks

  • Assessment of current and future prospects
  • Review of business plan assumptions
  • Regulatory compliance and litigation risks
  • Inputs to valuation
03

Tax Due Diligence

Tax due diligence reduces the risk of acquiring hidden tax liabilities and exposures along with the business.

Identify material tax exposuresValidate the seller's representationsTest the buyer's valuation assumptionsStructure the deal tax-efficientlyIdentify tax-saving opportunitiesUnderstand the target

Direct Tax Issues

  • Penalty and interest exposure
  • Withholding tax (TDS) compliance
  • Transfer pricing exposures
  • Tax exposure from past reorganisations such as mergers, demergers and capital restructuring
  • Carry-forward of losses after the transaction
  • Availability of tax holidays after the deal
  • Tax positions on deductions and exemptions claimed
  • MAT credit, where the old tax regime applies
  • Pending tax assessments and litigation

GST Issues

  • Classification and rate positions
  • Eligibility and reversal of input tax credit
  • Reverse charge compliance as a recipient
  • Input Service Distributor and cross-charges across registrations
  • Exports and zero-rated supplies, LUT and refunds
  • GST on reimbursements and related-party supplies
  • E-invoicing, e-way bill and return reconciliation gaps
  • Pending notices and demands

Customs, Trade & Legacy Issues

  • Imports from related parties without a Special Valuation Branch order
  • Benefits claimed under the Foreign Trade Policy, and related obligations
  • Non-fulfilment of incentive or export obligation conditions
  • Legacy service tax, excise, VAT/CST and entry tax exposures for pre-GST periods
  • See our customs and indirect tax services
04

How AAPT & Associates Helps

As a CA firm based in Noida, we deliver financial due diligence that looks at the strengths and growth potential of the business, as well as its risks, so you negotiate from a stronger position. We work with industry specialists, including legal and tax experts, to give you a comprehensive and integrated solution.

  • Helping clients design and implement an effective due diligence policy
  • Supporting transactions of every size, from small deals to large, complex and cross-border transactions
  • Early detection of risks and red flags
  • Review of management's reported or proposed EBITDA
  • Identification and continuous monitoring of crucial cash flow areas, such as debt
  • Analysis of past working capital trends
05

Why Financial Due Diligence Is Essential

  • Identify financial risks and liabilities before you are committed.
  • Confirm the accuracy of financial statements and records.
  • Assess performance and projections realistically.
  • Uncover potential fraud or irregular activity, with forensic support where needed.
  • Understand operational efficiency before investing.
  • Negotiate a better deal, with a clear view of the target's strengths, weaknesses, opportunities and threats.
  • Determine value accurately, and judge whether the deal is worthwhile.
  • Deal with issues in advance, rather than discovering them after closing.
  • Build trust through an independent third-party view.
  • Plan the business strategically before acquisition, including cost-saving and revenue opportunities.
06

How Our Findings Feed Into Your Deal

FindingHow it is typically used
Normalised EBITDABasis for the enterprise value and the multiple applied
Net debt and debt-like itemsDeductions from enterprise value to arrive at equity value
Normalised working capitalTarget working capital (peg) for completion accounts or locked-box mechanisms
Tax and compliance exposuresSpecific indemnities, escrows, price adjustments or conditions precedent
Control and reporting gapsPre-closing actions and the post-closing integration plan

Selling a business instead? See our vendor due diligence services. For end-to-end deal support, see M&A advisory.

07

Our Due Diligence Process

Scope & Priorities

We agree the deal context, key concerns, periods, materiality and timeline.

Information Request

We issue a targeted request list and review the data room.

Analysis & Interviews

We complete the financial and tax analysis, with management discussions and site visits.

Red-Flag Updates

We flag significant issues early, so you can renegotiate or seek more information.

Report

We issue a clear report with key findings, quantified exposures and recommendations.

Deal Support

We provide input into the SPA, price mechanisms, indemnities and closing.

08

Frequently Asked Questions

What is included in financial due diligence?
Financial due diligence typically covers quality of earnings and normalised EBITDA, assets and liabilities, working capital, net debt and cash flow, related party transactions, accounting policies and controls, and a review of projections and key risks.
What is the difference between financial and tax due diligence?
Financial due diligence assesses the target's earnings, assets, liabilities, cash flows and financial reporting. Tax due diligence focuses on direct tax, GST, customs and transfer pricing compliance, and on past and potential tax exposures that a buyer could inherit.
What is quality of earnings?
Quality of earnings analysis tests whether reported profits are sustainable, by adjusting for one-off, non-recurring or non-operating items and accounting choices, to arrive at normalised EBITDA that a buyer can rely on for valuation.
How long does due diligence take?
A focused financial and tax due diligence typically takes three to six weeks, depending on the size and complexity of the target, the quality of information in the data room, and how quickly management responds.
Do you review pre-GST tax exposures?
Yes. Where relevant, we review legacy service tax, excise, VAT/CST and entry tax positions for pre-GST periods, along with current GST, customs and direct tax compliance.
Can you work alongside our legal advisers?
Yes. We regularly work alongside legal due diligence teams and partner law firms, so that financial, tax and legal findings are aligned and reflected in the transaction documents.

Evaluating an acquisition or investment?

Share the deal context in confidence. We will propose a focused due diligence scope and timeline, at no cost and with no obligation.

Book a Free Due Diligence Consultation