The ability to execute due diligence effectively is a key aspect of the M&A process. A thorough understanding of the most frequent questions and the answers to due diligence will ensure that you’re able evaluate the risks that could be involved and make an informed investment.
What is your strategy for resolving discrepancies in the due diligence process?
The interviewer wants to know what you would do in the situation in which there is an inconsistency between internal and public documents. You will be tested by your ability to detect an issue, do the necessary research and take action to resolve the issue. This test also examines your attention to detail as well as your ability to meet tight deadlines.
How do you evaluate the quality of financial data for a business?
The objective of the buy-side is to determine if the target company is able to pay its debts and other obligations. This is accomplished by analyzing the company’s cash flow and comparing them to those of its competitors. It is essential to understand the company’s current assets (accounts receivable and inventory) and liabilities (accrued payroll, accounts payable, and accrued interest).
What are the steps you take to protect confidential information while conducting due diligence?
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