Due Diligence is the verification, investigation, or audit process undertaken regarding a potential deal or investment opportunity to confirm that all facts, financial information and information that has been divulged is true and correct and the selling party has not embellished any of the facts or figures that have been provided. It is Imperative that an appropriate level of due diligence is undertaken before any contracts are signed or deals are finalised.
If someone is looking to purchase a property or investment extensive due diligence is always undertaken to ensure that what you are purchasing is actually what you have been told which is why when we purchase a new house you ensure you get land reports and research the neighbourhood where you are looking to purchase. When purchasing a business there are many different pressure points that need analysed and because most people and businesses don’t do this regularly many do not know where to begin looking for issues that may arise.
It is essential that the due diligence process is done meticulously, and investors fully understand the nature and risks of the deal to ensure an informed investment decision is made. Some of the key areas where due diligence should be undertaken include:
- A complete overview of the target company;
- An in-depth analysis of the company financials;
- Review of current plant and equipment, technology and patents;
- Understand if the company offers the correct strategic fit;
- Review of current management structures and workforce;
- Analysis of any legal issues from the past present, and understanding of future legal risks;
- Review current information technology in use;
- Review of customers and suppliers, and;
- Review of current marketing strategy in place.
This is not an exhaustive list of due diligence requirements and each company will have different key areas that need to be analysed.
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Undertaking due diligence is an imperative part of the business acquisition process. It’s an area we’re very familiar with, hence if you require any assistance for an acquisition that you are undertaking feel free to contact us for a free confidential consultation with one of our team.