The ability to execute effective due diligence is a critical element of the M&A Process. Having a solid understanding of the most frequent questions and answers on due diligence will ensure that you’re able assess potential risks and make an informed investment.

What is your approach to resolving any issues that arise during the due diligence process?

The interviewer is interested in how you will react to a situation where there is a contradiction in public documents and internal records. You will be tested in your ability to spot an issue, conduct the necessary research and take action to resolve it. This question also tests your attention to detail as well as your ability to work under pressure deadlines.

How can you determine the quality of a company’s financial information?

The purpose of the buy-side is to determine if the company that is being targeted will generate enough income to pay off its debt and other obligations. This is done by analysing the cash flow of the business and comparing it against its competitors. It is essential to understand the company’s current assets (accounts receivable and inventory) and liabilities (accrued payroll, accounts payable, and accrued interest).

What are the steps you take to protect confidential information while conducting due diligence?