Which due diligence service you should choose to protect the investment

Key takeaways

• Financial due diligence gives investors an independent view of a target company’s financial performance and position before a transaction proceeds.
• A review can reveal issues affecting value and deal terms, including non-recurring earnings, working capital needs, debt-like items, and off-balance-sheet liabilities.
• In Thailand, differences between TFRS or TFRS for NPAEs and IFRS may affect financial comparability and create a need for accounting adjustments or post-acquisition conversion.
• The scope typically covers historical performance, quality of earnings, working capital, net debt, and financial risks that may influence pricing and negotiations.
• The right advisor should combine transaction experience, technical expertise, and knowledge of the Thai market, while tailoring the review to the deal’s objectives, risks, and value drivers.

Table of contents

• What is Financial Due Diligence?
• Why Financial Due Diligence Matters in Thailand
  • Earnings Quality
  • Working Capital Requirements
  • Debt and Cash Analysis
  • TFRS and IFRS Considerations
• The main types of financial-relevant due diligence.
  • Financial Due Diligence (FDD)
  • Vendor Due Diligence (VDD)
  • Commercial Due Diligence (VDD)
• What Does a Financial Due Diligence Review Cover?
  • Analysis of Historical Financial Performance
  • Quality of Earnings Review
  • Working Capital Analysis
  • Net Debt Review
  • Financial Risk Assessment
• How to Choose the Right Financial Due Diligence Provider
• Why Choose Forvis Mazars for Financial Due Diligence in Thailand?

Buying a business without proper financial due diligence can be costly. Reported profits may not reflect the company's true earning power, working capital requirements may be over or understated, and hidden liabilities can emerge after deal completion.

For investors, lenders, acquirers, and sellers, financial due diligence (FDD) provides an independent assessment of a target company's financial performance and financial position before a transaction proceeds. It helps buyers understand what they are really acquiring and whether the proposed purchase price reflects reality. For sellers, FDD can help validate earnings, anticipate buyer questions, address potential concerns before they become deal obstacles, and support value creation narratives during negotiations.

In Thailand, where accounting practices, business structures, and reporting standards may differ from other countries, a robust FDD review is particularly important for foreign investors. The right advisors can combine their local market knowledge with international transaction experience to identify risks, validate financial performance, and support you with informed decision-making.

As part of the global Forvis Mazars network which operates in more than 100 countries and territories, Forvis Mazars in Thailand provides financial due diligence services supported by over 400 professionals based in Thailand and its network, helping clients complete transactions with greater confidence.

What is Financial Due Diligence?

Financial due diligence is an independent review of a company's historical financial performance prior to an acquisition, investment, joint venture, or any strategic transaction.

Unlike a statutory audit, financial due diligence focuses on understanding the key financial drivers of a business from transactions perspective. The objective is to determine whether reported financial results accurately reflect the underlying performance of the business and whether any issues could affect its value, pricing, or deal terms.

A well-executed FDD review helps investors:

• Assess the quality and sustainability of earnings
• Identify one-off or non-recurring items
• Understand working capital requirements
• Evaluate debt and cash positions
• Identify off-balance-sheet liabilities

Understanding historical financial performance, assets, liabilities, and off-balance sheet items is a critical factor in assessing the viability of a transaction and ultimately influences the price an investor is willing to pay.

Why Financial Due Diligence matters in Thailand

Thailand remains an attractive destination for both strategic and private equity investors. However, buyers frequently encounter challenges that are difficult to identify through management presentations or statutory financial statements alone.

Common areas requiring investigation include:

Earnings quality

Reported EBITDA may include non-recurring income, owner-related expenses, unusual accounting treatments, or other items that do not reflect sustainable trading performance.

Financial due diligence helps establish a normalized earnings base that investors can rely upon when valuing a business.

Working capital requirements

Many transactions encounter disputes because the actual working capital required to operate the business differs from expectations.

A detailed review helps determine whether the target requires additional funding after completion and supports the negotiation of working capital adjustment mechanisms.

Debt and cash analysis

Not all obligations are obvious from headline balance sheet figures.

A financial due diligence review investigates:

• Bank debt and covenants
• Related party transactions
• Lease commitments
• Guarantees
• Contingent liabilities
• Other debt-like items

This helps investors determine the true enterprise value of the business.

TFRS and IFRS considerations

The above considerations are largely influenced by the accounting standards governed by each jurisdiction. For international investors who are interested to invest in Thailand, TFRS or TFRS for NPAEs are significantly different from IFRS.

A financial due diligence review assesses whether there are any accounting policy differences, local interpretations, or reporting practices that may affect comparability with the investor's reporting framework. Particular attention is typically given to areas such as:

• Revenue recognition
• Lease accounting
• Financial instruments
• Employee benefit obligations
• Business combinations
• Provisions and contingent liabilities

Understanding these differences helps investors evaluate the quality of earnings, identify potential accounting adjustments, and anticipate any financial statement conversion requirements following an acquisition.

The main types of financial-relevant due diligence.

Financial Due Diligence (FDD)

Our financial due diligence services involve understanding an organisation's historical financial performance, assessing its quality of earnings and current true financial position through analyses on- and off-balance-sheet assets and liabilities, and identifying any pre and possible post-deals impact. These are crucial to assessing the viability of a transaction, and will ultimately influence the price you are willing to pay.

Vendor Due Diligence (VDD)

Similar to financial due diligence, our vendor due diligence services involve understanding the seller’s historical financial performance, assessing its quality of earnings and current true financial position and identifying matters that may affect buyers’ perception and transaction value. These insights help sellers anticipate potential buyers’ concerns, strengthen the credibility of financial information presented during the sale process, and support more efficient negotiations and deal executions.

Commercial Due Diligence (CDD)

Through Forvis Mazars’ commercial due diligence consulting services, you gain an understanding of whether the financial performance of a target company is sustainable. We will assess the underlying business model, its market position, customer base, competitive dynamics, and growth assumptions to determine whether the business can perform as projected after a transaction closes.

What does a Financial Due Diligence review cover?

While every transaction is different, a typical financial due diligence review includes:

Analysis of historical financial performance

This involves a detailed examination of revenue, profitability, margins, costs, and key business drivers to understand how the company has performed over time.

Quality of earnings review

The review identifies:

• One-off income
• Non-recurring expenses
• Related-party transactions
• Accounting adjustments
• Exceptional items

The goal is to determine sustainable EBITDA and operating performance.

Working capital analysis

Reviewing historical trends helps establish the normal level of working capital required to support business operations and informs completion accounts negotiations.

Net debt review

The analysis identifies debt-like items, cash balances, and financial obligations that affect transaction value.

Financial risk assessment

The review highlights areas that may lead to purchase price adjustments, risks to future profitability, or issues requiring further investigation. The work typically includes analysis of historical and projected financial performance to identify issues that could lead to purchase price adjustments, and any working capital required post-deal.

How to choose the right Financial Due Diligence provider

Choosing an FDD provider is not simply about technical accounting expertise. The right advisor understands your transaction objectives, has relevant deal experience, and possesses deep knowledge of the local business environment and market nuances. A well-executed FDD should be tailored to the key value drivers and risks of your transaction, providing insights that support decision-making and negotiations.

Why choose Forvis Mazars for Financial Due Diligence in Thailand?

Forvis Mazars provides financial due diligence services tailored to the strategic objectives of each transaction rather than adopting a one-size-fits-all approach.

Our approach combines:

• Dedicated transaction services professionals
• Deep understanding of Thai market conditions
• Experience supporting domestic and cross-border transactions
• International methodologies and reporting standards
• Access to specialist tax, legal, operational, and valuation expertise when required

Move forward with confidence. Speak with our due diligence team to discuss your transaction and how we can help identify risks, validate performance, and support negotiations. Whether your deal requires a rapid assessment or a more detailed review, our team delivers practical insights tailored to your objectives and timeline.

FAQs

1. How do I choose a due diligence provider in Thailand?

Choose a provider that understands your transaction objectives and has relevant deal experience, strong technical expertise, and knowledge of Thailand’s business environment and market practices. The review should be tailored to the transaction’s key value drivers and risks rather than follow a one-size-fits-all approach. For cross-border deals, experience with local reporting standards and international methodologies is also important.

2. What is included in a due diligence checklist?

A financial due diligence review typically covers historical financial performance, quality and sustainability of earnings, working capital requirements, net debt, cash balances, and financial obligations. It may also review related-party transactions, lease commitments, guarantees, contingent liabilities, accounting adjustments, and other debt-like or off-balance-sheet items. The scope should reflect the transaction’s objectives and areas of financial risk.

3. Why is independent due diligence important before buying a business?

Independent financial due diligence helps buyers assess whether reported results reflect the company’s underlying performance and financial position. It can identify non-recurring earnings, unexpected working capital needs, debt-like items, and hidden liabilities that may affect value, pricing, or deal terms. These findings help buyers understand what they are acquiring and support more informed decision-making and negotiations.