Why stock deserves its own due diligence step
Financial due diligence usually relies on reported numbers. In a distribution, retail or manufacturing business, inventory can be a large part of the value, and it is where optimistic records, old stock and unrecorded consignments tend to hide. A short, focused site review reduces that uncertainty.
- Is the reported stock physically present at the stated sites?
- How much of it is slow-moving, damaged, expired or obsolete?
- Is any stock held for third parties, pledged or in dispute according to the records?
- Do system records, documents and physical stock tell the same story?
- How reliable are the warehouse controls that will produce future figures?
Working within deal constraints
Due diligence often comes with limited time, limited access and sensitivity about staff learning of the deal. We plan around this: the scope can be agreed with your advisers, the visit can be presented as a routine review, and we work from the data room where on-site time is short.
Sampling is weighted towards the highest-value and highest-risk items. Where the target has several warehouses, we prioritise sites by stock value and risk, and say clearly in the report which sites and items were not tested.
Reporting for the deal team
You receive a concise report written for decision-makers: what we tested, what we found, how significant each issue is and what questions to raise with the seller. Detailed workings are provided in Excel so your financial and legal advisers can use them.
We do not provide valuations, legal advice or an audit opinion. Our findings feed into the work of your financial, tax and legal advisers, who should confirm any local legal or accounting points.
Typical issues found in target warehouses
Every target is different, but certain issues come up often enough to plan for. Stock lists may include goods that were sold but not yet shipped, or goods returned by customers that were never inspected. Old stock may be kept in the books at full cost because nobody wanted to report a write-off before the sale. Consignment stock from suppliers may sit alongside owned stock without clear separation. Records in 1C may be accurate in total but wrong by location, which makes physical checks slow.
None of these issues necessarily stops a deal. What matters is that the buyer knows about them early enough to adjust the price, request a specific warranty or agree a closing count. Our report is written so your advisers can turn each finding directly into a question or a negotiating point.
What you receive
- D1Agreed scope and sampling plan aligned with your advisers
- D2Results of existence and condition testing by site
- D3List of slow-moving, damaged and doubtful stock with evidence
- D4Short assessment of warehouse controls and record quality
- D5Executive summary and detailed workings in English
Common questions
Q1Can you work under a non-disclosure agreement?
Yes. We sign an NDA before receiving any information about the target or the deal.
Q2How fast can you report?
Timing depends on the number of sites and access. We agree a timetable that fits your deal schedule at the scoping stage.
Q3Who do you work for in the deal?
We work for the investor or buyer who commissions the review and report only to them and their advisers.