Due Diligence is a process of research and analysis usually undertaken by accounting or consulting firms.  This exhaustive process is taken before a merger or acquisition of an organization, making an investment, entering into partnerships, granting of bank loans to corporate borrowers, vendor selection and even employee Hiring.

  • A prospective investor would need to make sure that he has a reasonable assessment of the value of the stake which he intends to acquire and that there are no hidden issues or liabilities in the business.
  • Usually the due diligence exercise needs to be done within a reasonable time frame but with a wide scope and in substantial detail.
  • As such, investors typically entrust this task to experts who are well-versed in due diligence and therefore are able to do a thorough check on the financial, tax and compliance position of the company within the limited transaction timeline.

Due Diligence providers prepare a report with a business analysis, setting out the observations on the business by materiality/importance and helps the acquirer in decision making and negotiation.

Due Diligence can be of various types:

  • Financial including Tax
  • Legal
  • Environment
  • Technical
  • Forensic