Due diligence is a crucial process in a variety of business transactions, such as mergers and acquisitions (M&A) as well as private equity or venture capital investments, and the initial public offering. Due diligence is also required for numerous financial transactions, like mortgages and loans. During the due diligence stage it's essential for businesses to conduct thorough checks to avoid unpleasant surprises once the deal is concluded.
There are a variety of due diligence and each requires a specific method of conducting it. Due diligence can take a variety of forms.
Review of financial records and documents such as profit and loss reports and balance sheets. This may include an examination of contracts related to tangible assets like vehicles and equipment. It could also involve a review of the tax situation of the business, with an eye towards any possible tax liabilities or opportunities.
Legal due diligence is reviewing consolidating legal structures such as ownership agreements, legal structures, and historic and current corporate documents. It's also important to consider the possibility of litigation and any settlements and judgments.
Regulative due diligence is the process of evaluating the compliance of a company's target to government regulations and laws. This is particularly important in sectors that are highly regulated for example, healthcare or finance. This type of due diligence typically includes a review of the company's permits, licenses, and regulatory compliance history. It may also include a check of the company's conformity with industry standards and best practices. It is usually recommended to seek the help of experts or advisory firms for this type of due diligence.
VDRs bridging the gap between traditional and digital due diligence