How Do You Perform Due Diligence?

If you’re considering a property purchase, an acquiring company examining a target prior to an acquisition or merger, or even when applying for a job, completing due diligence is an exhaustive and careful process. The more comprehensive and thorough your assessment is, the less likely you are to be confronted with hidden risks or surprises that could jeopardize the transaction.

Due diligence is performed in two primary types of business transactionsthe purchase or sale of services or goods, and mergers and acquisitions. The steps that you perform for each may differ significantly, based on your specific situation and the degree of complexity involved in the transaction.

In a purchase or sales transaction, you’ll have to review the terms of the agreement and review the financial statements of the company. This involves evaluating the liabilities, assets and cash flow. The company’s intellectual property, including trademarks, patents and copyrights, as well as determine any third-party agreements that relate to these assets. You’ll also look at the company’s security and compliance with laws and regulations, including environmental.

Due diligence is more thorough during the event of a merger as opposed to a sale or purchase. You’ll review the strategic goals of both companies and determine if they’re good match. Then, you’ll examine the potential growth opportunities for the company as well as its options for expanding its market and its ability expand to meet an increase in demand. You’ll also Due Diligence Betekenis be examining the corporate governance practices of the company, as well as its adherence to ethical and social standards and any social responsibility initiatives. You’ll also look at any major threats that could affect the company’s future growth and success, and develop plans to reduce these risks.