1. What exactly is due diligence?
Due diligence is an extensive process generally done before an acquisition, investment or business partnership to determine whether there are any potential risks.
2. Why is due diligence important?
Due diligence helps investors and companies understand the risks involved, the status of the deal and whether the deal fits with their portfolio. Due diligence is important because of the following reasons:
- To identify the potential risks involved in a deal
- To gain information to evaluate the deal
- To identify business opportunity if there is any and whether it complies with the investment criteria
3. How do you conduct due diligence?
The steps that are involved in conducting due diligence are as follows:
- Understanding the key objectives of the project
- Analysis of business financials and documents
- Proper screening of final offering
- Risk Management
4. What if you don’t conduct your due diligence?
If you don’t conduct due diligence, you might purchase a business or product that isn’t a good financial investment. You might make a purchasing mistake and end up on faulty or incomplete information.
5. What are some examples of due diligence?
- Reviewing and auditing financial statements
- Analyzing the consumer market
- Inspecting projections for future performance
6. Who can perform due diligence?
Only experienced and licensed accountants, business advisers and lawyers can precisely and professionally perform the due diligence task.
7. Who need Due Diligence Services?
Due Diligence is critical for any business. Those looking for new business opportunities or tie-ups can use Due Diligence Services to identify and mitigate potential risks. It is initiated before an acquisition, investment or business partnerships to determine any potential risks involved.
8. What are the benefits of Due Diligence Services?
The following are the benefits of Due Diligence Services:
- Identifies the potential risk associated with future investment and minimizes the risk factors
- Investigates the selling group and analyzes the business structure, market, supplier and customers
- Assess target company’s financial statements, metrics and projections of its future performance
- Understands the strategic fit between the company and the buyer
9. Who should go in for Due Diligence checks?
The co-investors, accountants, investment bankers, loan officers, landlords and other professionals involved in business transactions and contracts can go in for Due Diligence checks.
10. What is the scope of Due Diligence?
Whether you are acquiring a new company or selling a unit, the scope of Due Diligence depends on the company’s size and structure.