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Due Diligence Assessment Model

Due Diligence Assessment Model

Ratings:

4.8

(1)
|Views: 1,567|Likes:
Published by Vampire
By Prof Damodaran.
By Prof Damodaran.

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Categories:Types, School Work
Published by: Vampire on Jun 28, 2008
Copyright:Attribution Non-commercial

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10/01/2014

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[Company Name]
List data:
Ratings
Due Diligence Assessment Model: Scorecard
1
[Date]
23Gray cells will be calculated for you. You do not need to enter anything in them.4
Rating summary
5Financial performance
3.0 
Brand value
4.0 
Business condition
2.0 
Prospects for the future
1.0 
Competitive environment
4.0 
Human capital
3.0 
Quality of assets
3.0 
Structure of purchase transaction
5.0 
Other risks
4.0 
Total
29.0 
Financial performance
Due diligence itemDue diligence responseRating
What is the current year profit (loss)?3What is the previous year profit (loss)?What is the current year revenue?What is the previous year revenue?What is the current year gross margin?What is the previous year gross margin?What is the 3-year revenue growth trend?What is the industry average growth trend?How does revenue growth compare to inflation?Does the company have pricing power? Why or why not?Note: The current due diligence ratings use a scale of 5 ashighest and 1 as lowest. You can change the scale to another one, but make sure that it runs lowest to highest down thecolumn H2 though H6.The company reported GAAP net income of $2,100,000 with EBITDA of $2,800,000. Based on revenue levels, thesefigures are acceptable.What is the profitability and margin comparison versus theindustry?
 
Brand value
Due diligence itemDue diligence responseRating
4Can the brand be marketed globally?
Business condition
Due diligence itemDue diligence responseRating
2Are inventory and equipment a large part of value?Is there a strong culture?
Prospects for the future
Due diligence itemDue diligence responseRating
What is the industry outlook?1Are the products or services differentiating enough?Will the products or services soon be outmoded?
Competitive environment
Due diligence itemDue diligence responseRating
How many direct and indirect competitors are there?4Can the brand be leveraged to enter new markets or to resisteconomic downturns?Are a formal custodianship and an organization established toprotect the brand?What is the current cost of entry into the industry? Is this costrising or falling, and why?Does the need for expensive fixed assets or other large capitalexpenditures limit our ability to compete?If the business is service oriented, can it hold on to key talent?Why or why not?If applicable, is the research and development programadequately funded?Is international competition emerging, or is it a current factor within the industry?What is the company's reliance on the overall economicconditions?What is the company's relative standing against its directcompetition?Are there specific costs, processes, or technologies that limitcompetitive entry into the market?
 
Human capital
Due diligence itemDue diligence responseRating
3Is the work desirable within the job community?How does the compensation rank versus industry averages?
Quality of assets
Due diligence itemDue diligence responseRating
3
Structure of purchase transaction
Due diligence itemDue diligence responseRating
Will the purchase of the company be highly leveraged?5What liabilities need to be assumed?Is the company safely capitalized in its current condition?
Other risks
Due diligence itemDue diligence responseRating
Is the labor unionized?4Would critical staff remain if the company is sold?What is the general health of key personnel?Do the company's products or services require special skills,education, or licensing?Are the environment and the culture considered suitable to the job community?Is there a human resources strategy that promotes employeedevelopment?Are basic human resource compliance requirements met? If not,do the exceptions pose material legal risk?
Real estate:
Are the location and the facilities suitable for thebusiness?
Real estate:
What is the underlying land value and quality of thetitle?
Machinery and equipment:
What is the degree of obsolescence?
Machinery and equipment:
What are the costs for repairs?What are the costs for deferred purchases?How do cash flow ratios stack up against the industry andcompetitors?Are heavy government regulations prevalent in the industry, or isthere potential for such regulation?Are customer accounts diversified, or are there a few largeaccounts upon which revenues are dependent?Are operations unusually susceptible to weather, politicalevents, or other generally uncontrollable events?

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