Financial due diligence for private equity firms is not just a review of financial statements. It is a buy-side risk assessment that helps a deal team understand whether a target company’s reported performance can support the price, structure, and investment thesis behind the transaction.

In private equity, small financial issues can become expensive after closing. A few aggressive EBITDA adjustments, weak cash conversion, customer concentration, or understated liabilities can change the value of the deal. They can also affect debt capacity, integration plans, lender confidence, and the investment committee’s final decision.

A strong private equity financial due diligence process gives the buyer a clearer view of earnings quality, working capital needs, cash flow, liabilities, and forecast assumptions. It helps confirm what is real, what is temporary, and what should be reflected in the purchase agreement or valuation model.

What Is Financial Due Diligence in Private Equity?

Financial due diligence is the process of reviewing a target company’s financial condition before an acquisition, investment, recapitalization, or add-on transaction. For private equity firms, the main goal is simple: confirm whether the numbers support the deal.

This work usually covers historical financial performance, revenue quality, EBITDA normalization, cash flow, working capital, debt, liabilities, accounting policies, customer concentration, and management forecasts. The output is not just a summary of financial data. It is a practical view of the target’s real earning power and financial risks.

Private equity due diligence is different from a standard accounting review. A regular financial review may check whether statements are prepared correctly. Financial due diligence asks a more commercial question: can this business produce the level of earnings and cash flow needed to justify the investment?

How financial due diligence differs from broader deal due diligence

Broader deal due diligence can include legal, tax, operational, commercial, HR, IT, and regulatory reviews. Financial due diligence focuses on the financial facts that directly affect valuation, deal terms, and post-close performance.

For example, commercial diligence may show that a market is growing. Legal diligence may identify contract or compliance risks. But financial due diligence shows whether the company’s reported revenue, margins, working capital, and EBITDA are sustainable enough to support the proposed price.

That is why financial due diligence services are often central to buy-side diligence. They connect the target’s accounting records with the private equity firm’s investment model.

Why private equity firms rely on financial due diligence before closing

Private equity firms rely on financial due diligence because the cost of a bad assumption can be high. A target may look profitable at first glance, but deeper review can show that part of EBITDA came from one-time income, delayed expenses, unusual add-backs, or revenue that may not repeat.

Without a clear financial review, the buyer may overpay, use the wrong debt assumptions, accept weak working capital terms, or miss risks that reduce value after closing. Good diligence does not remove every risk. But it gives the deal team a better basis for negotiation and investment approval.

Why Financial Due Diligence Matters in Private Equity Transactions

Private equity transactions move fast. Deal teams often work under pressure from sellers, lenders, advisors, and internal timelines. In that environment, financial due diligence helps slow down the right parts of the process. It gives the buyer time to test the financial story before capital is committed.

The target company’s management team may present a strong growth story. The CIM may show adjusted EBITDA, margin expansion, and attractive forecasts. But private equity buyers need to know how much of that story is supported by actual financial evidence.

This is where financial due diligence becomes useful. It helps separate reported performance from normalized performance. It also helps identify acquisition risk before it becomes a post-close problem.

Preventing overvaluation and pricing mistakes

Overvaluation is one of the biggest risks in private equity deals. If EBITDA is overstated, the purchase price may be too high. If working capital needs are understated, the buyer may need to inject more cash after closing. If revenue is less stable than expected, the investment model may become too aggressive.

A proper investment risk assessment reviews the numbers behind valuation. It checks whether EBITDA adjustments are reasonable, whether margins are sustainable, and whether growth assumptions match historical performance. This can support a price adjustment, a different deal structure, or a decision not to proceed.

Identifying hidden earnings risks

Many financial risks are not obvious in headline numbers. A company may show strong revenue growth, but that growth may depend on a few customers. EBITDA may look healthy, but cash conversion may be weak. Margins may improve, but only because expenses were delayed before the sale process.

Financial due diligence helps identify these issues early. It reviews trends across revenue, gross margin, operating expenses, working capital, and cash flow. It also looks for unusual transactions, one-time benefits, aggressive accounting treatment, and unsupported management adjustments.

Supporting investment committee decisions

For private equity firms, financial due diligence also supports the investment committee. The committee needs more than management’s forecast or the seller’s presentation. It needs a clear view of what has been verified, what remains uncertain, and what could affect returns.

A strong financial due diligence report helps the deal team explain the target’s earnings quality, risks, normalized EBITDA, cash flow profile, and key assumptions. This makes the investment case stronger when the deal is sound. And when the deal is risky, it gives the firm a documented reason to renegotiate, restructure, or walk away.

Need an Independent Review Before Making an Investment Decision?

Private equity transactions often move fast, but the financial risks behind a target company need careful review. EBITDA adjustments, revenue quality, working capital trends, debt-like items, customer concentration, and cash flow issues can all affect valuation, deal terms, and post-close performance.

OGScapital helps private equity firms assess target companies before capital is committed. Our team can review key financial risks, test the quality of earnings, evaluate working capital assumptions, and help your deal team make a more informed investment decision.

What Private Equity Firms Review During Financial Due Diligence

A private equity due diligence checklist should not stop at revenue, EBITDA, and balance sheet totals. Those numbers matter, but they only tell part of the story. A proper due diligence review looks at how those numbers were created, whether they are repeatable, and where the financial risks may sit after closing.

For private equity firms, the goal is not to confirm that a target company had a good year. The goal is to understand the real financial profile of the business. That means reviewing revenue quality, normalized EBITDA, working capital, cash conversion, debt-like items, customer risk, and forecast assumptions in the context of the transaction.

This is where financial due diligence becomes more useful than a basic accounting review. It helps the deal team test the seller’s financial story and decide whether the proposed valuation still makes sense.

Revenue quality and sustainability

Revenue quality is one of the first areas reviewed during financial due diligence for private equity firms. A company may show strong top-line growth, but that growth may not be stable. It may come from one large customer, a short-term contract, price increases that are hard to repeat, or one-time project work.

A strong due diligence review separates recurring revenue from non-recurring revenue. It also looks at customer retention, contract terms, backlog, churn, pricing changes, discounts, seasonality, and collection patterns. This helps the buyer understand whether revenue is sustainable or inflated by short-term factors.

For a private equity buyer, this matters because revenue quality affects valuation, debt capacity, and the investment thesis. If the business depends on a few unstable revenue streams, the risk profile changes.

EBITDA adjustments and normalization

EBITDA is often central to private equity valuation. But reported EBITDA is not always the same as sustainable EBITDA. Sellers may present adjusted EBITDA with add-backs for owner expenses, one-time costs, restructuring items, legal fees, management salaries, or other expenses they believe should not continue after closing.

Some adjustments are reasonable. Others need more review. Financial due diligence tests whether each adjustment is supported, non-recurring, and relevant to the buyer’s future ownership. If an expense is likely to continue, it should not be removed from earnings.

EBITDA normalization is important because even a small adjustment can affect purchase price. If a business is valued at a multiple of EBITDA, overstated earnings can lead directly to overpayment.

Cash flow analysis

Strong EBITDA does not always mean strong cash flow. A company can report healthy margins while still struggling to collect receivables, fund inventory, pay vendors, or support growth. This is why cash flow analysis is a core part of the financial due diligence process.

The review should look at operating cash flow, capital expenditure needs, debt service, customer payment behavior, vendor payment timing, and the gap between earnings and actual cash generation. It should also identify whether growth requires extra working capital or recurring investment.

For private equity firms, cash flow quality matters because it affects leverage, distributions, reinvestment plans, and post-close liquidity. A business that cannot convert earnings into cash may need more support than the model assumes.

Working capital assessment

Working capital is one of the most common areas where deal economics change. The buyer needs to know how much working capital the business needs to operate normally after closing. If the target is set too low, the buyer may inherit a cash shortfall.

A proper working capital assessment reviews accounts receivable, inventory, accounts payable, deferred revenue, accrued expenses, seasonality, and historical working capital trends. It also checks whether the seller changed collection or payment behavior before the deal to make the balance sheet look better.

This part of the private equity due diligence checklist is especially important in businesses with seasonal sales, inventory-heavy operations, long collection cycles, or project-based revenue.

Debt obligations and liabilities

Financial due diligence also reviews debt, debt-like items, and hidden liabilities. These may include loans, unpaid taxes, customer deposits, deferred compensation, lease obligations, litigation exposure, unpaid bonuses, warranty obligations, or related-party balances.

Not all liabilities are obvious on the surface. Some may be buried in accruals, off-balance-sheet commitments, or contract terms. The buyer needs to know which items should reduce purchase price, be settled before closing, or be addressed in the purchase agreement.

OGScapital’s role in this type of review is to help deal teams identify financial risks that can affect valuation and negotiation. The goal is not to create unnecessary friction. It is to make sure the buyer knows what they are actually acquiring.

Customer concentration risks

Customer concentration can change the risk profile of a deal. A target company may look stable, but if a large share of revenue comes from one or two customers, the buyer needs to understand the terms, renewal history, margins, and relationship risk behind those accounts.

Financial due diligence reviews revenue by customer, margin by customer, contract length, payment behavior, renewal patterns, and customer churn. It also checks whether major customers are connected to the seller, founder, or management team in a way that may not continue after closing.

This is not just a commercial issue. It is a financial issue because customer loss can affect EBITDA, working capital, cash flow, and debt service after closing.

Financial forecasting assumptions

Most private equity deals include some view of future growth. The question is whether the forecast is realistic. Financial due diligence reviews management projections against historical performance, customer pipeline, margin trends, hiring plans, capacity limits, pricing assumptions, and capital needs.

A forecast may be possible, but still too aggressive for the investment model. The review should identify which assumptions are supported and which require more caution. This helps the deal team adjust the model before presenting the investment case to lenders or the investment committee.

Good financial due diligence does not replace judgment. But it gives the deal team cleaner inputs, fewer blind spots, and a better view of the risks behind the target company’s numbers.

Quality of Earnings: The Core of Financial Due Diligence

Quality of earnings is often the most important part of private equity financial due diligence. A QoE report helps the buyer understand whether reported earnings reflect the real operating performance of the business. It also shows which parts of EBITDA are recurring, supportable, and likely to continue after closing.

This matters because private equity firms often use EBITDA as a basis for valuation. If EBITDA is inflated, the purchase price may be too high. If EBITDA is understated, there may be room for a better investment case. The purpose of earnings quality analysis is to get closer to the true earnings power of the company.

What a QoE report reveals

A QoE report reviews revenue, expenses, gross margin, adjusted EBITDA, working capital, cash flow, and unusual transactions. It helps identify one-time gains, non-recurring expenses, accounting changes, unusual add-backs, related-party transactions, and other items that affect earnings.

For a private equity deal team, the value of a QoE report is practical. It gives a clearer view of normalized EBITDA and explains how that number was calculated. It also shows the risks, assumptions, and adjustments that should be considered in valuation and negotiation.

A useful QoE report should not read like a generic accounting summary. It should answer deal-level questions. What is the company really earning? How stable are those earnings? Which adjustments are supportable? Which risks should affect price or structure?

Common EBITDA adjustments identified during QoE reviews

Common EBITDA adjustments may include owner compensation, non-recurring legal costs, unusual professional fees, one-time consulting expenses, transaction-related expenses, severance, insurance proceeds, or discontinued product lines. But each adjustment needs support.

The main issue is not whether an adjustment exists. The issue is whether it is reasonable. For example, removing the founder’s salary may be acceptable only if the buyer has a realistic replacement cost. Removing a “one-time” expense may be inappropriate if the same type of cost appears every year.

This is where an independent financial due diligence review can protect the buyer. It helps test the seller’s adjustments and prevents unsupported add-backs from becoming part of the valuation.

Red flags private equity firms should not ignore

Some QoE findings require extra attention. These include large adjustments without documentation, revenue booked before delivery, margin improvement without a clear operating reason, delayed expenses, weak cash conversion, and heavy reliance on one customer or channel.

Another common issue is the gap between adjusted EBITDA and cash flow. If EBITDA is strong but cash flow is weak, the deal team needs to understand why. The cause may be delayed collections, rising inventory, customer payment issues, capital expenditure needs, or poor working capital discipline.

For private equity firms, these findings can affect more than price. They can affect lender discussions, management incentives, integration planning, and the first 100 days after closing. That is why quality of earnings should be treated as a core part of the due diligence review, not as a separate accounting exercise.

Common Financial Red Flags Found During Due Diligence

Financial due diligence is valuable because it often finds issues that are not obvious in the seller’s materials. A CIM may present a clean growth story, but the underlying financial data may show weaker earnings, higher risk, or more dependence on short-term factors than expected.

Private equity firms should not view due diligence red flags as automatic deal killers. Some issues can be addressed through price adjustments, working capital targets, indemnities, earnouts, seller financing, or post-close planning. But they need to be identified before closing.

The most important acquisition red flags are the ones that affect valuation, debt capacity, cash flow, or the buyer’s ability to execute the investment thesis.

Revenue spikes before a sale

A sudden revenue increase before a transaction can be legitimate. It may come from a new contract, pricing change, or strong market demand. But it can also signal pull-forward sales, one-time projects, heavy discounting, or customer behavior that will not repeat.

Financial due diligence should review monthly revenue trends, customer-level revenue, contract terms, backlog, credits, discounts, and post-period activity. The goal is to understand whether the spike reflects real momentum or a temporary increase created before the sale process.

Aggressive revenue recognition

Aggressive revenue recognition can make a company look stronger than it is. This may include booking revenue before delivery, recognizing project revenue too early, treating non-recurring revenue as recurring, or recording revenue with weak collection support.

This issue matters because revenue recognition affects EBITDA, working capital, and the forecast. If revenue was pulled forward, future periods may be weaker than the model expects. A proper financial risk assessment should test revenue policies against actual contracts, invoices, collections, and delivery timelines.

Weak cash conversion

Weak cash conversion is one of the clearest signs that reported earnings need more review. A company may show solid EBITDA but still fail to generate enough operating cash. This can happen when receivables grow faster than revenue, inventory builds up, payables are stretched, or capital expenditure needs are higher than expected.

For a private equity buyer, weak cash conversion can create problems after closing. The business may require more working capital, less debt, or a different growth plan. That is why cash flow analysis should sit next to EBITDA analysis in every serious due diligence review.

Customer concentration

Customer concentration becomes a red flag when the loss of one customer can materially affect revenue or EBITDA. The issue is even more serious when the customer relationship depends on the founder, has weak contract protection, or carries lower margins than the rest of the business.

The review should identify top customer exposure, revenue trends by customer, contract duration, renewal history, gross margin contribution, and payment patterns. If concentration risk is high, the deal team may need to revisit valuation, structure, or post-close risk mitigation.

Unrecorded liabilities

Unrecorded liabilities can reduce deal value after closing. These may include unpaid taxes, bonuses, commissions, warranty claims, customer credits, legal exposure, lease obligations, deferred revenue, or vendor disputes.

These issues do not always appear clearly in financial statements. They may come from management interviews, data room review, legal documents, payroll records, tax filings, or balance sheet testing. A careful financial due diligence process helps identify these items before they become the buyer’s problem.

OGScapital helps private equity firms approach these risks with a transaction-focused lens. The work is not just to find problems. It is to show how each issue may affect valuation, negotiation, deal structure, and post-close performance.

Found Potential Issues in a Target Company?

Revenue recognition concerns, aggressive EBITDA adjustments, customer concentration, weak cash conversion, or unrecorded liabilities can significantly affect valuation and deal economics. The earlier these risks are identified, the more options your team has to address them.

OGScapital helps private equity firms, independent sponsors, family offices, and corporate acquirers evaluate financial risks before signing a letter of intent or completing a transaction. Our team can assess earnings quality, working capital, cash flow, liabilities, and other areas that may affect investment returns.

Financial Due Diligence Process for Private Equity Firms

A clear financial due diligence process helps private equity firms avoid rushed decisions. It gives the deal team a structured way to review the target company, test the numbers, and identify issues before they affect valuation, financing, or closing terms.

The process may vary by transaction size, industry, and data quality. But the core due diligence workflow is usually the same. The buyer needs to understand historical performance, verify key adjustments, review the data room, speak with management, test the model, and document the findings in a way that supports the private equity acquisition process.

For PE teams, this structure matters because deal timelines are often tight. Without a disciplined process, critical risks can be missed. A seller may provide hundreds of files, but the real question is which financial issues can change the deal.

Initial financial review

The initial review starts with the basic financial package. This usually includes income statements, balance sheets, cash flow statements, trial balances, tax returns, management accounts, monthly financials, budgets, and the seller’s adjusted EBITDA schedule.

At this stage, the goal is to understand the business quickly. The review should identify key revenue streams, margin trends, expense patterns, cash conversion, working capital movements, and any obvious gaps in the seller’s financial story.

This early step helps the deal team decide where deeper review is needed. For example, if EBITDA improved while cash flow weakened, that issue should move higher in the diligence plan. If revenue grew sharply in the months before the transaction, customer-level analysis may become a priority.

Data room analysis

Data room analysis is where the review becomes more detailed. The financial due diligence team reviews source documents, schedules, reconciliations, invoices, customer data, contracts, payroll records, debt schedules, lease agreements, and working capital support.

The goal is not to review every document with the same level of detail. The goal is to connect the documents to the main deal risks. Revenue quality, EBITDA adjustments, working capital, liabilities, and customer concentration usually require the closest attention.

A well-run data room review also identifies missing information. If the seller cannot provide support for major add-backs, customer revenue trends, aged receivables, or debt-like items, that becomes a diligence finding. Missing data can be just as important as the data provided.

Management interviews

Management interviews help explain what the numbers do not show. Financial records can show a margin decline, a revenue spike, or a working capital change. But management can explain why it happened, whether it is likely to repeat, and how it affects the business going forward.

For private equity firms, these interviews are useful when they are specific. The questions should focus on revenue drivers, customer relationships, pricing, cost structure, hiring plans, capital needs, accounting policies, forecast assumptions, and any unusual financial activity before the sale process.

Good interviews also test consistency. If management’s explanation does not match the financial data, contracts, or customer trends, the deal team needs to review that area more closely. This is where experienced financial due diligence consultants can add value. They know which answers are reasonable and which answers need support.

Financial modeling and validation

Financial modeling and validation connect diligence findings to the investment model. The private equity team needs to understand how normalized EBITDA, working capital, cash flow, debt-like items, and forecast assumptions affect valuation and returns.

This step may include adjustments to revenue, gross margin, operating expenses, EBITDA, capital expenditures, working capital, and debt capacity. It may also include downside scenarios if customer concentration, churn, margin pressure, or cash conversion creates risk.

The point is not to build a more complicated model. The point is to make the model more reliable. If the model uses unsupported EBITDA, unrealistic growth, or weak working capital assumptions, the investment case may look better than the business can support.

Final diligence report

The final diligence report should give the deal team a clear view of the target company’s financial position. It should summarize normalized earnings, key risks, EBITDA adjustments, working capital findings, cash flow issues, liabilities, and open questions.

A useful report does more than list findings. It explains how each issue may affect price, structure, negotiation, closing conditions, or post-close planning. This helps the buyer decide whether to proceed, renegotiate, request protection in the purchase agreement, or stop the deal.

OGScapital prepares financial due diligence work with this practical purpose in mind. Private equity teams need clear findings they can use in investment committee discussions, lender conversations, and negotiations with the seller.

When Should Private Equity Firms Engage External Financial Due Diligence Advisors?

Private equity firms do not need outside support for every early review. Many deal teams can screen opportunities internally. But when a transaction moves toward a serious offer, outsourced financial due diligence can help reduce blind spots and pressure on the internal team.

External financial due diligence advisors are most useful when the deal is complex, time-sensitive, data quality is weak, or the investment committee needs an independent view of the target’s earnings and financial risks. They can also help when the PE team needs a deeper review but does not want to slow the deal process.

The value is not only technical. It is also practical. Experienced financial due diligence consultants can focus the review on issues that affect valuation, debt capacity, working capital, and deal structure.

Complex carve-outs

Carve-out transactions often require more detailed financial due diligence because the target may not have clean standalone financials. Revenue, expenses, employees, systems, leases, shared services, and corporate overhead may be mixed with the seller’s broader business.

In this situation, the buyer needs to understand what the business will look like after separation. That means reviewing standalone EBITDA, transition service costs, replacement costs, working capital needs, and any expenses that were not fully allocated before the deal.

An external advisor can help test whether the carved-out financials reflect the real cost structure of the business. This is important because missing standalone costs can reduce EBITDA immediately after closing.

Cross-border transactions

Cross-border transactions add another layer of risk. The buyer may need to review different accounting practices, tax structures, currencies, reporting standards, local compliance issues, and country-specific working capital patterns.

Financial due diligence in these deals should be careful with revenue recognition, intercompany transactions, transfer pricing, foreign exchange exposure, local debt, and tax-related liabilities. These issues can affect valuation and post-close integration.

Private equity firms often engage due diligence advisors in cross-border deals because local complexity can hide financial risks that are easy to miss from a high-level review.

Time-sensitive acquisitions

Some private equity acquisition processes move quickly. Competitive auctions, add-on acquisitions, lender deadlines, and seller pressure can leave limited time for detailed review. In these situations, outside support can help the deal team move faster without reducing diligence quality.

An advisor can focus on the highest-risk areas first: quality of earnings, working capital, cash flow, customer concentration, debt-like items, and forecast assumptions. This helps the buyer get useful findings while the deal is still active.

Fast does not mean shallow. It means the review must be focused. The goal is to identify the financial risks that can change the deal before key decisions are made.

Limited internal resources

Even strong private equity teams can face resource limits. Associates and vice presidents may already be managing sourcing, modeling, lender materials, legal coordination, and investment committee preparation. A detailed financial due diligence review can become difficult to handle internally.

Outsourced financial due diligence gives the team more capacity and a more independent view. It also helps avoid overreliance on seller materials or management explanations.

For firms without a large internal finance function, this support can be especially useful. OGScapital can help review financial information, identify risk areas, and provide deal-focused findings to support investment decision-making.

How Financial Due Diligence Supports Better Investment Outcomes

Financial due diligence supports better investment outcomes because it improves the quality of the decision before the deal closes. It helps private equity firms understand what they are buying, what risks they are accepting, and what assumptions need to be adjusted.

Good diligence can affect the entire acquisition strategy. It can support a lower purchase price, a different working capital target, stronger protections in the purchase agreement, more conservative debt assumptions, or a revised post-close plan. In some cases, it can also confirm that the deal is stronger than the buyer first expected.

The main value is clarity. A private equity firm does not need perfect information to make a decision. But it does need enough reliable information to understand the real earnings profile, cash flow needs, liabilities, and financial risks of the target company.

Financial due diligence also improves communication with lenders, legal teams, advisors, and the investment committee. When the deal team can explain the quality of earnings, normalized EBITDA, working capital position, and key risk areas, the investment case becomes more grounded.

For private equity firms, deal success is rarely about one number. It depends on price, structure, financing, execution, and post-close performance. Financial due diligence helps connect those pieces before capital is committed.

OGScapital helps buyers review target companies with that goal in mind. The work is focused on practical findings, not generic reporting. The purpose is to help your team reduce risk, support negotiations, and make a better-informed investment decision.

Planning an Acquisition or Investment?

Financial due diligence can uncover risks, validate earnings, and help your team make informed investment decisions before capital is committed. Revenue quality, EBITDA adjustments, working capital needs, liabilities, and cash flow issues can all affect valuation and deal terms.

OGScapital helps private equity firms, family offices, independent sponsors, and corporate buyers review target companies before closing. Our team can assess the financial risks behind the deal and help you move forward with a clearer view of the numbers.

Frequently Asked Questions

What is the main goal of financial due diligence for private equity firms?

The main goal of financial due diligence for private equity firms is to determine whether a target company’s reported performance reflects its real financial condition. The review helps buyers validate earnings, assess cash flow, identify financial risks, and decide whether the proposed valuation is supported by the company’s actual results.

How does financial due diligence affect valuation in a private equity transaction?

Financial due diligence can affect valuation by identifying EBITDA adjustments, non-recurring revenue, working capital issues, customer concentration risks, and debt-like items. These findings can support a price adjustment, different deal terms, stronger protections, or a decision to stop the transaction.

What is reviewed during financial due diligence?

A typical financial due diligence review covers revenue quality, EBITDA normalization, cash flow, working capital, debt, liabilities, customer concentration, accounting policies, and management forecasts. The purpose is to understand whether earnings are sustainable and whether the business can support the buyer’s investment case.

Why is a Quality of Earnings report important for private equity firms?

A Quality of Earnings report helps private equity firms understand whether reported EBITDA represents the true earning power of the business. It identifies non-recurring items, unsupported add-backs, accounting issues, and other factors that may distort profitability before valuation and deal terms are finalized.

When should a private equity firm hire an external financial due diligence advisor?

A private equity firm should consider hiring an external financial due diligence advisor when the deal is complex, time-sensitive, cross-border, or dependent on adjusted EBITDA. Outside advisors can provide an independent review of earnings quality, working capital, cash flow, liabilities, and other financial risks before capital is committed.