FDD Master Class Lecture Notes

Introduction

• Hello everyone, welcome to the FDD master class.
• Designed for those interested in due diligence.
• Practical understanding and reading of due diligence reports.

Target Audience

• Relevant for:
  • Freshers looking to build a career in due diligence.
  • Experienced individuals seeking exposure in due diligence.

Importance of Analytical Mindset

• Many struggle to get articleships due to a lack of analytical skills.
• Interviews will focus on checking analytical ability.
• The class will teach analytical approaches to due diligence.

Ground Rules

• Keep thought processes unrestricted.
• Understand numbers to excel in interviews and the master class.

Goals of the Master Class

• Help you clear interviews for due diligence positions.
• Understand practical workings of due diligence.
• Gain an edge over other candidates in FDD.

Understanding Due Diligence

• Practical example of a company raising funds.
• Importance of checking company valuation and projections.
• Due diligence as thorough checking before making decisions.

Example

• Analogy of checking background before marriage.
• The necessity of thorough checks to avoid future issues.

Types of Due Diligence

• Financial Due Diligence (FDD):
  • Analyze the company’s financial position, risks, and opportunities.
• Legal Due Diligence: Check legal aspects and liabilities.
• Operational Due Diligence: Evaluate operational efficiency.
• Environmental Due Diligence: Compliance with environmental regulations.
• Commercial Due Diligence: Analyze market dynamics and competition.
• Technical Due Diligence: Assess technology capabilities.
• Cultural Due Diligence: Examine organizational culture compatibility.

Process of Due Diligence

• Understand the investment banking process and how due diligence fits into it.
• Examples of investments needing due diligence: mergers, acquisitions, capital raising, etc.

Differentiating Audit and Due Diligence

• Objectives differ:
  • Due Diligence: Analysis for future business prospects.
  • Audit: Assessment of historical financial positions.
• Types of analyses included in due diligence reports, which are more detailed than audits.

Case Study

• Practical application of due diligence knowledge.
• Need for analytical skills to interpret financial information.
• Prepare for interviews with real-world cases and analysis.

Homework Assignment

• Analyze a provided income statement for a hypothetical company.
• Calculate bid and identify necessary client details for due diligence.

Conclusion

• Recap of key takeaways from the lecture.
• Importance of understanding due diligence in the context of investment banking.
• Encourage further reading on due diligence reports.

Closing Thoughts

• Engage with the content, share feedback, and spread the knowledge.