What is involved in Due Diligence?
Due diligence is defined as “research and analysis of a company or organization done in preparation for a business transaction.” Definitions aside, due diligence is the process ensuring things are as they appear before a deal is closed. Due Diligence, is often a complex process that can be time-consuming. The effort will be will worth is as when you complete the due diligence process you will be sure that you are making a decision with all of the information.
During the due diligence process, you will review a myraid of documents including:
- Operating documents that detail the legal structure and incorporation of the company
- Internal Revenue Service (IRS) records
- Insurance policy information
- Personnel policies
- Capital assets and and real assets
- Contracts, licenses, agreements and affiliations
- Technology and Intellectual Property
- Current or potential legal liabilities
- Marketing materials
It is important, during the due diligence process, that a buyer consider not only the financial aspects of a business but also organizational and operational items as well. Be sure to seek documentation and ask questions about the company’s culture, strategy, leadership and competencies.
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