Quick Summary
Due Diligence is a thorough investigation and analysis of a company's business, financials, legal compliance, and operations before making an investment decision.
Due Diligence is the process of investigating a business or person before signing a contract, or an act with a certain standard of care. It is commonly performed before mergers, acquisitions, investments, or partnerships.
Types of Due Diligence
- Financial Due Diligence: Financial statements, debt, receivables, cash flow analysis
- Legal Due Diligence: Corporate structure, contracts, litigation, IP, compliance
- Commercial Due Diligence: Market position, competition, growth prospects
- Tax Due Diligence: Tax returns, assessments, disputes, incentives
- HR Due Diligence: Employee contracts, ESOPs, labor disputes
- Environmental Due Diligence: Environmental clearances, pollution controls
Process
- Sign NDA (Non-Disclosure Agreement)
- Prepare Due Diligence checklist
- Request documents from target company
- Document review and analysis
- Management interviews
- Site visits (if applicable)
- Prepare Due Diligence Report
Key Documents Reviewed
- Certificate of Incorporation, MOA, AOA
- Annual returns and financial statements (5 years)
- Statutory registers
- Material contracts and agreements
- Litigation status
- Tax returns and assessments
- Property documents
- IP registrations
Key Points
- Comprehensive investigation
- Done before investment/M&A
- Multiple types (financial, legal, tax)
- NDA signed before process
- Results in Due Diligence Report