Uncovering a Hidden Working Capital Risk in Due Diligence
Pushed past a vague management explanation to surface an undisclosed customer agreement that changed the deal's risk profile
Pranav Manishankar
Senior Analyst at Leading financial services firm
From their time as
Senior Analyst
Results • 2026
Overview
Pranav was working through due diligence on an acquisition target when he noticed a receivables spike in one quarter that the model couldn't explain. The initial explanation from management was straightforward: normal seasonality in the business.
The Story
Pranav was working through due diligence on an acquisition target when he noticed a receivables spike in one quarter that the model couldn't explain. The initial explanation from management was straightforward: normal seasonality in the business.
He didn't accept that at face value. He checked the same quarter across the two prior years and found no comparable seasonal pattern either time. Seasonality alone didn't hold up, and he said so directly on the call, naming the specific discrepancy and asking what else might be driving it.
The answer that came back changed the picture entirely. A large customer had been granted extended payment terms through a side agreement that hadn't appeared anywhere in the data room. The reported revenue for that customer was less certain to convert to cash on the normal timeline, which was a genuine business risk, not a modeling artifact.
Pranav flagged the finding immediately to the senior team. The working capital assumptions in the model were adjusted, and the issue was written up explicitly in the due diligence memo as a risk for the client to weigh. The finding made it into the final client output because he refused to accept the first explanation and kept pushing on the specific gap until the real answer surfaced.