What happens in financial and commercial due diligence?

The main workstreams

Financial diligence in practice

• Quality of earnings. Which profits will repeat, and which will not?
• Revenue concentration. What share comes from the largest customers, and on what terms?
• Order pipeline. How much future revenue is contracted, and how reliable is it?
• Working capital. What level does the business need, and is it being managed to flatter a sale?
• Debt-like items. Dues and obligations that should reduce the price.

Commercial diligence in practice

• Capability stack. What the business can actually deliver, and what depends on a few people.
• Client dependency. How easily could major clients move?
• Talent retention. Who must stay for the deal to work, and what keeps them?
• Partner ecosystem. Which relationships support revenue and what happens at a change of control.

What buyers do with the findings

Findings feed three decisions: whether to proceed, what price to pay, and which protections to ask for in the agreement, such as indemnities, price adjustments or conditions before closing. Some transactions also need regulatory clearances, for example from the Competition Commission of India where thresholds are met. Check the current position with your counsel.

How sellers can prepare

• Organise financials, contracts and statutory records into a data room before the buyer asks.
• Reconcile management accounts with audited statements and explain differences.
• Document customer terms, key-person arrangements and any disputes.
• Decide in advance who answers which questions, so replies are fast and consistent.

Public company records filed with the Ministry of Corporate Affairs are a common first check that buyers run on any Indian company, so make sure what you have filed matches what you say.