Financial due diligence is buyer-side review of the target’s historical and projected financial performance, focused on validating the EBITDA figure on which the deal is priced. It typically includes detailed analysis of revenue quality, customer concentration, gross margin trends, working capital, capital expenditure, debt-like items, and EBITDA add-backs.
Financial due diligence is usually conducted by an accounting firm and produces a quality of earnings report. In Australian sub-$20M deals, financial due diligence costs typically range from $40,000 to $100,000.