due diligence

Due diligence

An internal audit of a target firm by an acquiring firm. Offers are often made contingent upon resolution of the due diligence process.

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due diligence

The process of investigating all facts,conditions,rules,laws,regulations,financial considerations, or any other such matters as would affect one's decision to purchase property. The various types of investigations as would comprise due diligence will vary from property to property. With the purchase of a home, it might include nothing more than a home inspection, termite report, and a review of any restrictive covenants.When purchasing raw land for development, it could include zoning issues, possible environmental contamination, surveys, soil compaction studies, analysis of cost to develop versus value when completed, and so on as far as the imagination can go.

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Due Diligence (DD)

What Does Due Diligence (DD) Mean?

(1) An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regard to a sale.

(2) Generally, due diligence refers to the care a reasonable person should take to obtain all the material facts before entering into an agreement or transaction with another party.

Investopedia explains Due Diligence (DD)

(1) Offers to purchase an asset are usually dependent on the results of due diligence analysis. This includes reviewing all financial records plus anything else deemed material to the sale. Sellers also can perform a due diligence analysis on the buyer. Items that may be considered include the buyer's ability to purchase as well as other items that would affect the purchased entity or the seller after the sale has been completed. (2) Due diligence is a way of preventing surprises that could unnecessarily harm either party involved in a transaction.

Related Terms:
• 10-K
• Accrual Accounting
• Balance Sheet
• Generally Accepted Accounting Principles—GAAP
• Technical Analysis