Buying a business has lots of twists and turns. You need to go through various paper work and the last but not the least is to conduct due diligence. If the due diligence services are avoided, you may encounter with nasty surprises. It’s all because it is the process of evaluating a business situation from all aspects before finalizing the buying deal. The service is conducted after the intent to purchase documents have been signed but before the final agreement.
Due diligence is not a general investigation but it covers specific elements which may vary based on the situation. Here both parties are protected but it primarily protects the purchaser by uncovering the potential liabilities and any financial matter to ensure nothing is hidden.
The Subject matters it involves:
The subject is based on the situation, but most of the time it includes:
General Company Information
The history of the company is evaluated along with any succeeding business plans like short term and long term goals, any mission and objectives. It helps to know the how about of the organization and any potential risk.
Company Management Info
Who is the organization in charge? What are their credentials? How long are they working? Are they trustworthy or reliable? The employees, especially those who are in a prestigious position of the company are evaluated.
Legal Inquiries
The diligence service is considered incomplete till the legal structure of the business is conducted. The business legal structure may include copies of the articles of incorporation, copies of the contracts and agreements binding the organization, service agreement on the products and any product liability documents. It also involves discussion of the ongoing and pending litigations if any. Moreover, it needs to disclose the information about the company advisors of legal, financial and insurance. A background check is conducted on all the board members and top level executives. It needs to review the employment tax reports and status of the independent contractors.
Products & Services
If the organization sells products, the list of products is required to examine. The company competition status also needs to be reviewed. Pricing strategies, copyrights, trademarks and license of the company for selling the products are reviewed.
Who Help Conducting Due Diligence?
For this, an expert diligence team is outsourced. They are experienced and have profound knowledge in conducting diligence as per your requirements. Outsourcing the service saves time and money.