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Due diligence

Due diligence investigates a target company in different business transactions, like mergers and acquisitions, IPOs, restructurings, and divestments.

While due diligence is often associated with acquiring companies investigating target companies in M&A deals, it may take other forms:

  • Seller due diligence. It occurs when a seller prepares to be acquired in a merger or acquisition. The seller brings its business functions in order, eliminates accounting and compliance issues, and values its business against performance benchmarks.
  • IPO due diligence. It occurs when investment banks investigate private companies that aim to go public. IPO due diligence evaluates the target company’s business functions against readiness for public markets.

Key due diligence terms

    1. Due diligence stream: A particular business area under investigation
    2. Financial due diligence: It investigates the target company’s financial health and determines its acquisition value.
    3. Operational due diligence: It investigates how the target company delivers profit-generating goods and services.
    4. Commercial due diligence: It investigates the competitive landscape, customer relations, and marketing strategies.
    5. Technology due diligence: Investigates IT infrastructures, systems, and software applications.
    6. Tax due diligence: Evaluates tax treatment and determines tax-related risks and opportunities.
    7. Legal due diligence: It reviews the target company’s contracts, agreements, and licenses.
    8. Compliance due diligence: Creates the target company’s compliance profile and maps compliance risks.
    9. Due diligence checklist: Outlines business functions, documents, and focus areas under investigation during due diligence.
    10. Non-disclosure agreement (NDA): Determines the scope and usage limitations for sensitive information shared in an M&A deal.
    11. Audit: It occurs when independent third parties (auditors) investigate the target company.

Navigating due diligence topics

Our due diligence blog encompasses the following topics:

  1. Due diligence best practices
  2. Functional due diligence checklists
  3. Guides to due diligence streams
  4. Due diligence risks and challenges
  5. Cybersecurity practices during due diligence
  6. And more

Our due diligence articles help DD professionals, M&A buyers and sellers, accountants, auditors, M&A professionals, investment bankers, and investors.

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Due diligence for startups: checklist, common challenges, and their solutions

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60 M&A Questions to Ask During Integrated Due Diligence

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