Due Diligence

Due Diligence is a comprehensive appraisal conducted by a business before entering into an agreement or transaction to ensure all financial, legal, and operational risks are identified and mitigated. This process involves verifying the credentials, financial stability, and reliability of the other party.

During financial due diligence, businesses examine financial statements, tax returns, and credit history. Legal due diligence involves reviewing contracts, licenses, and regulatory compliance. Operational due diligence checks the efficiency of operational processes, supply chains, and management structures.

For example, in financial statements, businesses verify revenue figures, profit margins, and asset valuations. In contract reviews, they check terms and conditions, termination clauses, and intellectual property rights. In supply chains, they assess logistic networks, supplier reliability, and cost structures.