How would an increase in net working capital affect your DCF? What does that mean?

First Round

  • Identify potential target firms
  • Reach out to gauge interest with teaser; sign CA (confidential agreement) and receive CIM (confidential information memorandum) and basic financial projections
  • Send letter of intent (LOI) with preliminary offer, which is not legally binding

Second Round

  • Access to data room, including monthly financials, key company files, contracts, market analysis, product / service details, etc.
  • Perform detailed analysis and financial modeling, present to internal team for approval
  • Site visit, management meetings, due diligence questions
  • Send updated offer with SPA (sales and purchase agreement) which is a legally binding offer

Third Round

  • Usually exclusive, meaning buyer can spend on third party due diligence (DD) without risking being overtaken by another buyer
  • Third party DD includes: accounting, legal, tax, accounting, quality of earnings, environmental, management, background checks, consulting / market research, etc.
  • Close transaction, send wire transfer