How To Become a Due Diligence Analyst: Step-by-Step Guide

A due diligence analyst is a professional who is responsible for conducting research and analysis on a company or individual prior to making an investment. This research is used to make sure that the investment is a sound one and that there is no hidden risk that could result in financial loss. If you are interested in becoming a due diligence analyst, it is important to know what the job entails and what steps you need to take to pursue this career. In this article, we will discuss the duties of a due diligence analyst and the steps you need to take to become one.

What Does a Due Diligence Analyst Do?

A due diligence analyst is a professional who conducts research and analysis on potential investments to help their firm make informed decisions. They are responsible for assessing the financial, legal and operational risks of an investment and providing recommendations to their team.

Due diligence analysts typically have the following duties:

• Conducting research on potential investments using public records, company filings and other sources
• Analyzing financial statements and other data to identify risks and opportunities
• Identifying and evaluating key business drivers and trends
• Developing models to forecast future performance
• Preparing reports detailing their findings and recommendations
• Presenting their findings to senior management or clients
• Assisting with the negotiation of deals
• Monitoring investments after they have been made

Due Diligence Analyst Salary and Job Outlook

The average salary for a due diligence analyst is $72,615. However, this figure can vary based on the level of experience, education, industry and geographical location of the analyst.

The Bureau of Labor Statistics expects job prospects for due diligence analysts to grow at an average rate over the next decade. This is due to many factors such as the increasing complexity of financial transactions. Companies often need the expertise of a due diligence analyst to reduce the risk of financial losses.

How to Become a Due Diligence Analyst

Here are several steps you should take to become a due diligence analyst.

1. Earn a bachelor’s degree in business, accounting, finance or a related field

Due diligence analysts typically need a bachelor’s degree to be considered for an entry-level position. Common degrees that are useful for this career include business, accounting and finance. Coursework in these programs should focus on math, economics and statistics.

It is also helpful to take electives related to the industry you want to work in. For example, if you want to work as a due diligence analyst for a technology company, it can be beneficial to take courses in computer science or information systems.

2. Gain experience working in the financial industry

Due diligence analysts typically need at least three to five years of experience in the financial industry before they can apply for a job in this field. Entry-level positions in finance, accounting and banking provide you with valuable experience working with financial statements and other types of data analysis.

Working as an assistant or associate accountant is one way to gain experience analyzing financial statements. You may also work as a credit analyst, where you review loan applications and determine whether to approve them based on the borrower’s ability to repay.

3. Develop strong analytical and research skills

Due diligence analysts must be able to analyze large amounts of data and identify trends or issues. They need strong research skills to find the information they need for their analysis. Analytical skills are also important because due diligence analysts often have to predict how a company’s stock will perform based on its current financial situation.

4. Understand financial statements and regulatory filings

Due diligence analysts must be able to read and understand financial statements, such as a balance sheet or income statement. They also need to know how to interpret the footnotes that accompany these statements. Regulatory filings are documents companies must submit to federal agencies like the Securities and Exchange Commission (SEC). These filings contain important information about the company’s operations and finances.

Understanding these types of documents is essential for due diligence analysts because they often review this type of information when conducting research on a potential investment opportunity.

5. Be able to work independently and meet deadlines

Due diligence analysts often work independently and may have strict deadlines to meet. They must be able to manage their time well and prioritize tasks based on the needs of their employers. Due diligence analysts who work for large companies or organizations may also need to collaborate with others in different departments.

6. Stay up to date on changes in the financial industry

Due diligence analysts must be aware of changes in the financial industry and any new regulations that may affect the companies they are analyzing. For example, if a new regulation is passed that requires publicly traded companies to disclose certain information, due diligence analysts will need to know what this information is and how to find it.

Keeping up-to-date on these types of developments can help ensure you’re providing your clients with the most accurate information possible.

7. Consider pursuing a master’s degree in business administration (MBA) or a master’s degree in finance

While a master’s degree is not always required for this position, many employers prefer candidates who have an MBA or a master’s degree in finance. These advanced degrees provide more opportunities to develop your skills and knowledge of the financial industry.

An MBA program can help you learn how to apply business concepts to corporate situations. A master’s degree in finance teaches you about investments, risk management and other aspects of working with companies that are publicly traded on stock exchanges.