Common Questions and Answers on Due Diligence

The ability to conduct due diligence effectively is a vital aspect of the M&A process. Understanding the most common due diligence questions and their answers can help you evaluate possible risks and make an informed decision.

What is your approach to solving any discrepancies that arise in the due diligence process?

The interviewer is looking for how you would handle a situation in which there is a discrepancy between public documents and internal records. You will be tested in your ability to spot an issue, do the necessary research and then take action to resolve it. This test also examines your attention to detail and your ability to meet tight deadlines.

How do you determine the quality of the financial data for a company?

The objective of the buy-side is to determine if the company is able to pay its debts as well as other obligations. This is accomplished by analyzing the cash flow of the company and comparing it against its counterparts. It is site important to understand the company’s assets (accounts receivable and inventory) and liabilities (accrued payroll accounts payable, accounts receivable and accrued interest).

What steps do you take to safeguard confidential information during a due diligence investigation?