Due diligence is the procedure of investigation that a business conducts when it is contemplating making an investment or signing an agreement. Due diligence is typically performed by businesses when they are buying or selling products or services, merging with a different company, or making an investment. Due diligence may also be a part of a human right impact analysis to ensure the company isn’t violating the rights of others. Due diligence is an essential part of any transaction but it can be especially crucial for companies entering into M&A. In actuality, inadequate and incorrect investigation has been a major cause of some of the most significant M&A transactions that have failed.
There are many different kinds of due diligence, and each type is a very complex undertaking based on the particular situation. Financial due diligence, for an example, requires examining the company’s records to ensure that the figures contained in the Confidentiality Information Memorandum are accurate. This may include comparing the latest unaudited statements with comparable statements and audited financial statements.
Due diligence on real estate is a time-consuming, intensive process that can cost lots of money. Buyers should be aware of zoning restrictions and existing structures and also potential costs and liens. This may involve interviewing key staff as well as analyzing the record keeping system and evaluating compliance requirements. In the past, a lot of this work needed to be done face-to-face at the location of the seller, however, thanks to advancements in technology, much of it can be completed online.