Strategic Due Diligence:
Determine the Soundness of the Target Investment

Strategic Due Diligence

Determine the soundness of the target investment

Strategic due diligence is a rigorous analysis that evaluates the strategic rationale driving the deal. It is a forward-looking examination of the drivers of earnings and cash flow to determine if the target is a sound investment. It answers important questions, including the following:

• What are the future profit streams? Are they at risk?
• What are the strategic issues ahead?
• What is the value of the target company?
• What is the value of operational improvements?
• What are the synergies between the target and the buyer?
• When will the synergies impact cash flows?
• What should be the price of the acquisition?

What You Will Learn

The four steps of comprehensive strategic due diligence:

1. Strategic due diligence of the stand-alone target
2. Valuation of the stand-alone business
3. Valuation of synergies
4. Estimation of the final price of the deal