The term due diligence may not get the heart rate going, but it is an essential business procedure when selling or purchasing companies. It is the process of examining every aspect of the business to make sure that all parties involved are aware of what they’re getting into.
The process can take anywhere from 30 to 60 days, however it should begin as soon as possible to avoid any confusions and legal implications. It is essential that businesses prepare for the process ahead of time by establishing a document library including all relevant documents as well as records. This will help to save time and money during the actual investigation.
There are many types of due diligence, depending on the nature of deal and business. Here are some of the most commonly used:
Legal Due Diligence
This type of due diligence investigates any potential liabilities that could impact the outcome of a deal. It typically includes carefully examining all the relevant contracts such as licensing agreements, partnership agreements, term sheets, as well loan and bank financing agreements.
Commercial Due Diligence
This includes evaluating a company’s market according to its size, growth, and competition. It could also involve interviews with customers, looking at competitors and writing a detailed analysis of the company’s strengths and weaknesses.
Due-diligence is a type of investigation that examines all available information regarding a possible case, including any evidence that may be used against an accused. It also considers all exculpatory evidence that is available. When deciding whether to bring charges against someone, a prosecutor must decide this.