During private debt fund due diligence, reviewing financial statements is crucial to understand the fund’s financial health, performance, and liquidity. Here are the most important financial statements to review:
– Income Statement: The income statement shows the fund’s revenues, expenses, and net income over a specific period. It provides insights into the fund’s profitability and operating efficiency [5].
– Cash Flow Statement: The cash flow statement shows the fund’s inflows and outflows of cash over a specific period. It provides insights into the fund’s liquidity and ability to meet its financial obligations [5].
– Balance Sheet: The balance sheet shows the fund’s assets, liabilities, and equity at a specific point in time. It provides insights into the fund’s financial position and solvency [5].
Comprehensive financial due diligence helps the firm determine the appropriate valuation for the target company [5]. It is important to note that this is not an exhaustive list, and additional financial statements may be relevant depending on the specific circumstances and requirements of the due diligence process.
Citations:
[1] https://www.affinity.co/guides/due-diligence-checklist-for-private-equity-firms
[2] https://caia.org/sites/default/files/7_private_debt_2-26-18.pdf
[3] https://www.lavenpartners.com/thought-leadership/real-estate-debt-funds-operational-due-diligence-a/
[4] https://4degrees.ai/blog/private-equity/a-guide-to-conducting-private-equity-due-diligence/
[5] https://www.affinity.co/guides/private-equity-due-diligence-how-to-conduct-it-properly
[6] https://www.unpri.org/private-debt/responsible-investment-ddq-for-private-debt-investors/4071.article