How to Implement Due Diligence for Project-Driven Organizations

Due diligence to appreciate the value of an organization (before an acquisition, for example) is a specialty generally driven by finance specialists. However in the case of project-driven organizations, conventional financial analysis cannot easily reflect the actual situation of the organization and what can be expected to happen. Project Value Delivery’s unique expertise and experience is shared in the new White Paper 2013-07 which includes practices and tools to improve the reliability of these due diligence.

We recommend a five step approach:

• Check the adequateness of the Cost Control approach
• Check the quality of the Project Controls processes
• Check the actual project performance and extrapolate the possible outcome
• Evaluate actual expected cash flow of current projects
• Add-on the treatment of assets

Because of the fact that projects are one-off endeavors, usual approaches used for manufacturing companies cannot be used for due diligence of project organizations. The insights of experienced specialists in project management and project controls are needed to give the right understanding of the opportunities and risks of the organization being analysed, which often can be extremely significant both ways, changing fundamentally the perceived and actual value of the organization under scrutiny.

Proper due diligence of project-driven organizations should not be underestimated. There are many examples of poor decision-making in the area of project-driven organizations’ acquisitions conducted without a proper understanding of the issues at stake – and the actual final valuation can be quite different from the rosy picture shown by conventional accounting!

Read our latest White Paper 2013-07 to understand what it takes to do successfully the due diligence of project-driven organization!