How will the Corona crisis affect Financial Due Diligence in terms of resilience for unlikely but impactful events? Especially when it comes to projecting future revenues and deliverability of synergy assumptions.
The provision for for events are usually built in the system – especially if they are cyclical in nature. The larger unlikely but impactfull events can come from a deeper knowledge of the industry. My colleague who is an economist used to factor in a el nino into the modelling – decades down the track. I think similarly, a prudent measure of the financial position of companies might involve incorporating the impact of a similar covid situation. It may become a stress testing point and also built as an assumption.
I found this article useful. Although it was developed for Western Australia, some concepts are universal. https://www.bdo.com.au/en-au/insights/corporate-finance/articles/navigating-m-a-deal-activity-during-and-post-covid-19-in-western-australia
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