ABSTRACT

The primary purpose of the Commercial Due Diligence (CDD) investigation is to decide whether or not to buy the company. One of the key outputs from CDD should be the construction of a financial model of the business in question. The first stage in the model specification process is to refine the broad output requirements that were defined from the scope stage into defined outputs that the model will produce. There are three techniques for developing a model specification: Bubble diagrams; Calculation tables and Prototype models. A calculation table is a detailed statement of the inputs and calculations in a model. The design stage involves producing the most effective structure for the model. When the models for a number of subsidiaries in a business are similar, but not quite the same, it is still a good idea to use separate worksheets for each subsidiary.