Due diligence process is a way for a potential buyer to analyse critical aspects of your business to vet it for any potential risks or concerns before any mergers or acquisitions.
This process involves the analysis of your company’s finances. Both, the current and prospects of your company is considered to determine whether or not the cash flow is sustainable in the long term and has the potential to grow.
This part of the process focuses on the accuracy of the financial information provided by you. This may involve quality of earnings report, usually done by an accountant. Depending on the situation, a Tax Due diligence team may also be required.
The legal aspects of your business will be inspected where lawyers may look into any current contracts with providers and check for potential liabilities.
IT professionals may be brought in at this stage to check for security risks, downtime problems, and so on so that they can be resolved by the time the deal is finalized.
The specifics of this phase may vary on the type of industry and involves the checking of any potential environmental risks that may be involved in acquiring your company.
There are generally some steps and measures a company has to take before they finalize a deal. An understanding of the Due Diligence process and its actions will help to navigate this.
The people that may be involved in the due diligence process are,
Each step of the Due diligence process involves the participation of these professionals at different stages and provides the buyer with specific information.
To assure the buyer of the safety of the investment, you may be asked for the following information,
After the conclusion of the Due Diligence process, the team will finalize a report and sent it to the buyer. The report usually contains a summary of all problems or issues that may have been discovered.
The processes involved in Due Diligence are aimed to root out any potential risks or red flags for the sake of the buyer. It can be a long and drawn out process but knowing what is involved and why it is so will help make it go a lot faster and smoother.
By Shashi Ranjan
who is a talented and experienced digital marketing professional and also a prolific blogger.
Member since July, 2019
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