1
Q
Broad & Common Diligence Topics
A
- Commercial Diligence
- Valuation Diligence
- Accounting Diligence
- Legal Diligence
2
Q
Commercial Diligence Topics
A
- Market Related Issues
- Competitive Positioning
- Business Model
- Historical Performance
3
Q
Valuation Diligence
A
- Trading Comps
- Precedent Transactions
- Next Financial Buyer Analysis
- Sum of the Parts Analysis
4
Q
Accounting Diligence Topics
A
- Acquisition / Divestiture Accounting
- Adjustments / Non-Recurring Items
- Debt vs. Working Capital
- Quality of Earnings
- Revenue and Expense Recognition
- Tax Issues
5
Q
Legal Diligence Topics
A
- Pending Litigation
- Intellectual Property
- Corporate Structure
- 3rd Party Contracts
- Employee Contracts
6
Q
Important Types of 3rd Party Contracts
A
- Vendor Contracts
- Customer Contracts
- Credit Documents and Debt Holders
- Contracts related to PP&E
- Joint Ventures
7
Q
Gatto Key Industry Analysis Topics
A
- Point in the life cycle
- Competitive dynamics
- Cyclicality
- Cost structured: fixed vs. variable
- Dependence on customers, suppliers, products…
- Gov’t Regulation
- Fad / Fashion risk
8
Q
3 important themes in Commercial Diligence / Qualitative Analysis
A
- Industry Analysis
- Business Strategy
- Management
9
Q
Fixed vs. Variable Costs
A
- Fixed costs occur regardless of manufacturing or sales level
- Variable costs will change depending on how many products you buy or manufacture
10
Q
Types of Fixed Costs
A
- Committed fixed costs: cannot be changed easily; buildings and equipment, real estate taxes, insurance expense and top level manager salaries
- Discretionary fixed costs: arise from annual decisions by management; advertising, research, etc.
11
Q
What are Porter’s 5 Forces
A
Competitive Dynamics
Threat of New Entrants
Bargaining Power of Suppliers
Bargaining Power of Customers
Threat of Substitutes
