The Rise of Offshore Financial Diligence: Can It Work for Middle-Market Deals?

In the ever-evolving landscape of financial services, a notable trend has emerged: the use of offshore teams for financial diligence and CFO services, particularly in the middle-market sector. Recently, I learned about an intriguing setup spearheaded by a former colleague who transitioned from a prestigious consulting firm to launch his own venture in India.

This individual, boasting 13 to 15 years of experience in financial diligence, has successfully established a partnership with a U.S.-based private equity (PE) fund. His operation, based in India, is managing middle-market and lower-middle-market financial diligence work directly. This development is certainly eye-catching, and I find it worth discussing.

Admittedly, at first glance, such an arrangement raised eyebrows. However, upon further reflection, it’s clear that with the right talent and communication, this model can indeed flourish. While there are inherent challenges in offering diligence services remotely — especially when dealing with larger capital transactions that typically require more extensive teams and immediate client presence — the middle-market space may present unique opportunities for this offshore approach.

Middle-market transactions often involve smaller teams, seldom exceeding three to four professionals. If the quality of work remains high and communication is seamless, it stands to reason that offshore setups can be effective in delivering solid results. In fact, this model has already found success in at least one instance.

The central question remains: Would you consider relying on an offshore team for middle-market diligence, provided they maintain high standards? Or does the concept still seem too unconventional?

In closing, the increasing acceptance of offshore operations in the financial sector prompts deeper reflection on how we perceive the balance between quality, cost-efficiency, and global collaboration. Your thoughts on this emerging trend are most welcome!