due diligence


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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.

Due Diligence

The investigation of an asset, investment, or anything else to ensure that everything is as it seems. Due diligence helps a buyer or investor make sure that there are no unexpected problems with the asset or investment and that he/she does not overpay. Due diligence can be a complex and formalized process in the acquisition of a company. Even when buying a house, for example, due diligence involves time consuming and at times expensive endeavors, like a home inspection. However, due diligence is seen as a necessary part of doing business or buying an asset. See also: 10-K, Due diligence meeting.

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.

References in periodicals archive ?
Many due diligence red flags can be mitigated, but if the risk profile of a third party is too high and cannot be mitigated, companies must be ready to either reject or terminate the third party.
To keep your due diligence costs down you need to effectively run and manage your advisors and at the start clearly outline your expectations.
Yet we have found no convergence on what the practice of due diligence is and how this process of making sense of an investment target in a moving context can best be managed.
Sellers will believe that there is a greater certainty of closure if a buyer has taken the time to engage in quality due diligence and is selective about the issues of importance in the transaction.
In the FCPA context, the extent of due diligence may vary with whether the target does business in corrupt countries, whether the target's business involves interaction with foreign governments, and whether the target employs third parties.
The Rule 144A due diligence process can be divided into two parts, although these are closely related: documentary, or legal, due diligence, and "management" due diligence.
Since the margin of error for survival in M&As is thin - and getting thinner - due diligence should start even before negotiations are underway.
The scope of a due diligence analysis with vary according to management experience, timing, size and complexity of the deal (see the exhibit on page 73 for a general rundown.
Filled with case studies, this book is required reading for private equity and real estate investors, as well as fund managers and service providers, for performing due diligence on the noninvestment risks associated with private equity and real estate funds.
The true purpose of the due diligence process is to determine what you are actually buying, discover any historical liabilities/obligations that the business may have, and what the actual assets of the business are, says WHK's Greg James.
Paragon's general and administrative expenses increased by $14,000 for the second quarter of 2005 to $239,000, and for the six months of 2005, these expenses increased by $233,000 to $697,000 for due diligence undertaken mostly during the first quarter of 2005 on a large potential acquisition.
If the acquirer carries out traditional due diligence and focuses primarily on checking sanitized, vetted reports and interviewing key employees, it may completely overlook the candid, liability-laden statements that are crucial to understanding the target, warts and all.