Client Profile:
A mid-sized precision engineering company under financial stress, targeted for turnaround funding
(Proposed investment: $9.6M USD, led by a consortium of venture capital firms)
Engagement Scope:
CFO Pulse was engaged by the investor group to conduct a buy-side financial due diligence aimed at evaluating the true financial position of the business, uncovering risk areas, and validating turnaround potential.
CFO Pulse Approach:
🔍 1. Financial Normalization & Net Worth Analysis
- Recalculated Adjusted EBITDA by excluding non-operating, one-time, and irregular income/expenses
- Reconstructed actual net worth after removing overstated reserves and impaired assets
- Assessed working capital impact and sustainable earnings trends
🧾 2. Asset & Liability Validation
- Verified fixed asset base and depreciation practices
- Reviewed inventory valuation, identifying overstatement risks tied to slow-moving stock
- Validated debt obligations, including off-balance-sheet exposures and related-party loans
⚠️ 3. Risk Identification & Compliance Review
- Highlighted statutory compliance gaps, pending dues, and weak internal documentation
- Identified financial reporting red flags that could affect investor structuring and valuation
- Delivered a red flag summary with mitigation pathways
Tangible Results:
- Investors received a clear view of the company’s true financial standing and obligations
- Red flag disclosures enabled better deal negotiation and strategic structuring
- Report empowered the consortium to confidently assess turnaround feasibility and plan capital infusion accordingly
- Full-scope diligence delivered in line with international investor standards
