Financial Due Diligence and Quality of Earnings in Nigeria
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Financial due diligence should help a buyer understand what the accounts say about the business being acquired and which issues could affect price, terms or the decision to proceed. A quality-of-earnings review asks whether reported performance is supported, recurring and relevant to the proposed transaction.
Wigmore Trading welcomes enquiries for acquisition-review planning and transaction-support coordination in Nigeria. The actual accounting specialists, scope, access and report reliance must be agreed. This guide does not establish an audit, assurance opinion or independent financial conclusion.
Set the scope and decision
Identify the entity, business unit or assets under review, financial periods and transaction stage. State what information is available and which questions are most important. A limited review should not be described as comprehensive diligence.
| Review area | Questions to examine |
|---|---|
| Earnings | Revenue recognition, recurring costs, adjustments and concentration |
| Cash conversion | Receivables, inventory, payables and operating cash flow |
| Debt and obligations | Borrowings, commitments, guarantees and debt-like items |
| Transaction perimeter | Related parties, shared services and excluded operations |
Examine earnings adjustments carefully
Management may describe expenses as exceptional or propose an adjusted profit figure. Ask qualified reviewers to assess the evidence and whether those costs are genuinely unlikely to recur. An adjustment should not be accepted simply because it increases the purchase-price calculation.
Review customer concentration, returns, discounts and unusual period-end activity. Distinguish invoiced revenue from cash received. Consider whether performance depends on arrangements that will change after completion.
Understand working capital and cash needs
A business can report profit while requiring significant cash to operate. Examine collection patterns, inventory quality and supplier terms. Understand seasonality and whether recent balances are representative.
Deal advisers should distinguish a normal operating requirement from a negotiated completion adjustment. The appropriate mechanism depends on the transaction and documents; a generic online formula should not determine the purchase agreement.
Coordinate with other diligence
Financial review should connect with commercial demand, tax exposure, legal obligations and operational condition. A customer contract may support revenue today yet require consent on a change of control. A machine may appear as an asset in the accounts but need substantial investment.
Quality of earnings, statutory audit, fraud investigation and valuation are different assignments. Define which work is required and avoid implying that one report automatically covers the others.
Agree access, reporting and reliance
Use a controlled data room and appropriate confidentiality arrangements. Define who may rely on the report, limitations, deadlines and the procedure for questions to management. Record missing information and unresolved issues rather than filling gaps with assumptions.
For vendor due diligence, clarify that the seller commissioned the work and establish the terms on which buyers can access or rely on it. A vendor report is not automatically a replacement for every buyer’s review.
Does a clean review guarantee no hidden liabilities?
No. Findings depend on scope, evidence and limitations. Qualified advisers should explain the practical implications.
What should I send Wigmore?
Describe the transaction, review purpose, available records, timetable and specialist support sought. Do not send detailed accounts or private records before an appropriate information-sharing process is agreed.
Prepare a non-confidential enquiry brief
Note whether you are a buyer, seller, shareholder or adviser; the sector and broad location; the decision you need to support; your intended timing; and the service scope required. Separate confirmed facts from assumptions and identify who is authorised to give instructions.
Do not send private identity, employee, banking or confidential transaction records through a general sales enquiry. Agree the engagement, confidentiality and access arrangements first. This checklist does not submit information.
Related acquisition and advisory guides
- Deal Origination and Corporate Matchmaking in Nigeria: Acquisition Search
- Corporate Divestment and Asset Disposal in Nigeria: Sale-Planning Guide
- Business Succession and Founder Exit Planning in Nigeria
- M&A Financial Modelling in Nigeria: Acquisition Scenarios and Deal Value
- Commercial and M&A Due Diligence in Nigeria: Scope and Checklist
- Company Verification Before Acquisition in Nigeria: Ownership and Risk Checks
- M&A Transaction Documents in Nigeria: Legal Scope and Negotiation Planning
- M&A Structuring and Corporate Restructuring in Nigeria: Options to Review
- Business Valuation in Nigeria: Company, Equity and Acquisition Value
Discuss your transaction-support requirement with Wigmore Trading
Send a non-confidential brief. Our team can discuss the appropriate commercial, search or coordination scope and the named specialist support required. Fees, responsibilities, professional appointments and deliverables are agreed for the engagement.
Discuss financial due diligence Nigeria on WhatsApp · Book an initial consultation · Email an enquiry
Updated 3 November 2026. This is general process guidance; it does not establish a legal, tax, audit, valuation or financing opinion, a live deal listing or a guarantee of completion.
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