{"id":2166,"date":"2026-08-03T09:35:09","date_gmt":"2026-08-03T09:35:09","guid":{"rendered":"https:\/\/pierag.com\/US\/?p=2166"},"modified":"2026-08-14T10:03:45","modified_gmt":"2026-08-14T10:03:45","slug":"financial-due-diligence-in-india-what-buyers-and-sellers-both-need-to-know","status":"publish","type":"post","link":"https:\/\/pierag.com\/US\/financial-due-diligence-in-india-what-buyers-and-sellers-both-need-to-know\/","title":{"rendered":"Financial Due Diligence in India: What Buyers and Sellers Both Need to Know\u00a0"},"content":{"rendered":"

\u201c<\/span>Caveat Emptor<\/span><\/i>\u201d,\u00a0a Latin phrase, which means \u201clet the buyer beware\u201d,\u00a0usually,\u00a0applies to all contracts of sale and purchase of goods and services. The principle of\u00a0<\/span>caveat emptor<\/span><\/i>\u00a0requires a buyer to assess and investigate the goods and services being bought since once sold, all the risks of such goods and services belong to the buyer and the\u00a0Sellers\u00a0is relieved of all the risks of goods and services sold.\u00a0<\/span>Caveat Emptor<\/span><\/i>\u00a0also applies to the sale and purchase of businesses.\u00a0Accordingly, an Acquirer\u00a0is required to\u00a0assess and investigate all the risks and potential losses associated with a business before\u00a0acquiring\u00a0the business. The process of making such an assessment and investigation is called due diligence.<\/span>\u00a0<\/span><\/p>\n

Investopedia.com states that \u201c<\/span>d<\/span><\/i>ue diligence<\/span><\/i>\u00a0is an investigation,\u202f<\/span>audit<\/span><\/a>, or review performed to confirm facts or details of a matter under consideration. In the financial world, due diligence requires an examination of financial records before\u00a0entering into\u00a0a proposed transaction with another party.<\/span>\u00a0Due diligence is a systematic way to\u00a0analyse\u00a0and mitigate risk from a business or investment decision. Due diligence involves examining a company’s numbers, comparing the numbers over time, and benchmarking them against competitors. The same due diligence strategy will work on many other types of investments.\u201d<\/span>\u00a0<\/span><\/p>\n

While there are many types of due diligences required to be conducted in a M&A transaction, such as operational due diligence, commercial due diligence, legal due diligence, tax due diligence, etc., financial due diligence in most cases is the most important due diligence from an Acquirer\u2019s perspective.\u00a0<\/span>\u00a0<\/span><\/p>\n

What Is Financial Due Diligence and Why Does It Matter in Indian Transactions?<\/span><\/b>\u00a0<\/span><\/p>\n

Financial due diligence\u00a0(FDD)\u00a0is the process of independently verifying a\u00a0business’s financial\u00a0performance and financial\u00a0position before a deal closes. It covers historical\u00a0performance\u00a0especially quality of earnings, working capital trends, debt and debt like items and other assets and liabilities of the Target entity.<\/span>\u00a0<\/span><\/p>\n

According to Grant Thornton’s\u00a0Dealtracker, India recorded over 2,400 M&A and PE transactions in 2025, with total deal value USD 97 billion.\u00a0Most of\u00a0such transactions require an FDD. There are also IPOs and qualified institutional placements (QIPs) which also require FDD.\u00a0<\/span>\u00a0<\/span><\/p>\n

While due diligence has been traditionally conducted by Acquirers\/ Investors (called the \u201cbuy-side\u201d due diligence), now even the Sellers\/ Target entity commission due diligence (called the \u201csell-side\u201d or \u201cvendor\u201d due diligence). Sell-side or vendor due diligence is usually carried out prior to the identification of potential acquirers\/ investors.<\/span>\u00a0<\/span><\/p>\n

Apart from gaining a better understanding of the Target\u2019s business and the assets and liabilities to be\u00a0acquired, a buy-side FDD enables Acquirers\/ Investors to\u00a0identify\u00a0issues:<\/span>\u00a0<\/span><\/p>\n