Types of Due Diligence

The term due diligence may not get the heart rate up, but it’s an essential business procedure when buying or selling businesses. It involves looking into all aspects of the company to ensure that all involved parties are aware of the deal they’re about to enter into.

The process could take 30 to 60 days, however it should begin as soon as possible in order to avoid confusions and legal implications. Companies must prepare for the process by creating an archive of documents that includes all relevant documents and records. This will save time and money in the course of the actual investigation.

There are many types of due diligence, depending on the nature of deal and the company. Here are the most frequently used types:

Legal Due Diligence

This type of due diligence investigates the possibility of liabilities that could affect the success of a transaction. It usually involves carefully examining the entirety of contracts that are essential to the transaction, such as licensing agreements or partnership agreements, term sheets and loan and bank financing agreements.

Commercial Due Diligence

This includes Find Out More evaluating a company’s market according to its size, growth and competition. This can include customer interviews, assessing competition and creating an analysis that is more thorough of the company’s strengths and weaknesses.

This type of due diligence focuses on all the information available regarding the possibility of a case, including any evidence against an accused person. It also involves assessing all exculpatory evidence that is available. This is what a prosecutor does when deciding whether to bring charges against anyone.