Can I ask for Financials from 2015 to 2017 before signing the LOI?

May 24, 2023

by a searcher from INSEAD in Chicago, IL, USA

Can I ask for financials from 2015 to 2017 before LOI to understand the company performance a bit better because with COVID the companies financials have been moving up and down quite a bit. The broker hasn't been very positive about sharing this.

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Reply by an intermediary
from Harvard University in Fredericton, NB, Canada

Absolutely. Financials tell the story of the business. They will also tell you the story of the business owner (personal use of company money/write-offs).

I believe what's on paper and I want to know what happened and why. Financials are historical documents. Depending on the size of the deal, you can even ask for the internal projections. How many times did management hit their projection targets? Why or why not did they hit or miss? What does that say about the management team?

Buyers buy the future. Are the projections realistic? How are they aligned with past performance. How well is this company performing to the benchmarked companies.

You need to sleep at night. You probably won't once you're the owner. But, this isn't something that keeps you up at night (regret that you didn't listen to your instincts).

Get the financials you want to make the right decision for YOU and YOUR peace of mind.

Reply by a searcher
from University of Calgary in Calgary, AB, Canada

Thanks for the tag ^redacted‌. Welcome to the world of information asymetry in private company transactions. Not unreasonable to me to ask for more information if the financials have more volatility than you are expecting/or the explanations on recent results warrant. Consistent with the comments above, have pushed for more information in the past pre LOI in part because the CIM was weak, and effectively blacklisted by that broker for being high maintenance. Alternatively had access to a deal recently that was marketing off strong TTM, vendor prepared and provided 13 years worth of P&L (no intermediary) to show that current results were in line with early historic, but it had been well below TTM (modestly above break even/losing money in last 10 years). Abbreviated version of your ask shouldn't be an issue if finance function is a priority.

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