Due Diligence Investigation
Make Sure Your Business Relationships are Good Ones
Due Diligence Investigation is the process of exercising reasonable care to avoid unnecessary exposure, and usually includes the examination of a company’s management, finances, performance, mission, history, aims, clients, and anything else that details how a business functions. Investigations are done to verify stated information prior to entering into a business transaction. It is vital to conduct a due diligence investigation before a merger, company purchase, or acquisition because it reveals hidden liabilities. The purpose of this investigation is to determine the “ground truth” and minimize business risk while providing quality information to the decision makers.
Benefits of Due Diligence Investigations
By conducting a due diligence investigation, you can figure out in detail a company’s circumstances. Large businesses routinely conduct due diligence to protect their extensive assets. If there is even a small risk of failure, wouldn’t you want to be forewarned? A due diligence investigation does just that—once problems start, they become difficult to fix. Even in business, prevention is a much better than damage-control.
Due diligence is not limited to investigate hidden information or analyze risks. It can also determine opportunities when the acquisition or venture starts. If the potential partner has a strong chance of winning bids in future contracts—your business can also benefit from this situation.
When Due Diligence Investigations are Needed
If you run a business or plan on taking a high-ranking position, due diligence investigations give you a complete picture of a company. Depending on what they find, investigators can justify negotiating a lower price and ensure all claims by a company are substantiated. If you are investing your resources in a business transaction, a due diligence investigation can help you make an informed decision. A due diligence investigation is crucial when:
- Forming strategic alliances and vendor relationships
- Taking on new prospective clients
- Contemplating a partnership arrangement
- Considering mergers and acquisitions
- Evaluating a new product, service or licensing agreement
- Investing in a new venture
Issues Due Diligence may reveal:
- Improper or illegal activity
- Litigation histories including suits, liens and judgments
- Key business personnel
- Business headquarter locations
- Physical location of the business
- Known business affiliations
- Compliance with regulations
- Tax liens and other filings
- Officers and director history
- Corporate filings
- Other business relationships
- Hidden history
Due Diligence Investigation Aspects
- Legal: This aspect deals with the intellectual property of the company in question. It involves contract, loans, property, employment, and pending litigations.
- Financial: Financial due diligence verifies a company’s finances. It reviews earnings, assets, liabilities, cash flow, debt, and management.
- Commercial: Commercial due diligence brings into consideration the current market. This includes conversations with customers, competitor assessment, and any business plans in place.
- Other: External types of due diligence include taxation, pensions, human resources, and IT systems.
Mitigate your Risk with Bawn
How willing are you to risk your own business? Due diligence may cost your company a certain amount, but think of it is as a lifetime investment. Not doing a due diligence investigation prior to a major change is like entering into a battle blindfolded—Let Bawn provide the needed intelligence to be successful.