Due diligence isn’t an expression that can set your blood pumping however it is a crucial business practice when selling or buying a business. It involves looking into every aspect of the business to ensure that all involved parties are aware of what they are getting into.
The process can take anywhere from 30 to 60 days, but it should start as soon as possible in order to avoid confusion and legal implications. It’s important that companies prepare ahead of time by establishing a document library filled with all relevant documents and documents. This will save both time and money during the actual investigation.
There are many types of due diligence, depending on the nature of deal and business. Here are some of the most commonly used:
Legal Due Diligence
This kind of due diligence focuses on any potential liabilities that could affect the performance of a transaction. It typically involves carefully reviewing all contracts that are material that are related to licensing agreements or partnership agreements, term sheets, loan and bank financing agreements.
Commercial Due Diligence
This involves evaluating the company’s market by its size and growth, as well its competition. It may also involve conducting interviews with customers, evaluating competitors and developing a thorough analysis of the company’s strengths and weaknesses.
This type of due-diligence investigation focuses on every detail available regarding a possible case, including any evidence that could be against an accused. It also requires an evaluation of all the evidence that is available. When deciding whether to file charges against someone, a prosecutor will take this step.