Due diligence blog: Exploring key aspects and best practices
| Due diligence (DD) is the comprehensive audit the acquiring company conducts on the target company before finalizing the transaction. |
Key due diligence terms
- Due diligence stream. It’s the target’s business function under investigation, such as financials, HR, technology, operations, commerce, legal, and tax matters.
- Integrated due diligence. It emphasizes a multidimensional, cross-functional approach when DD teams examine interdependencies between business functions, risks, and opportunities.
- Due diligence checklist. It lists due diligence items, including documents, risks, and opportunities under investigation. It’s an efficient way to organize DD investigations and manage to-do lists.
- Due diligence report. It’s a comprehensive collection of due diligence findings, including issues, risks, opportunities, synergies, and insights.
- Target risk profile. It explores the target’s risks based on due diligence findings.
Key aspects of successful due diligence
- Multidisciplinary approach. Acquirers conduct the most comprehensive assessments while evaluating cross-functional risks and opportunities. Multidisciplinary investigations help to reveal hidden risks and overlooked opportunities otherwise invisible in one-dimensional reviews.
- Timely investigation. Successful acquirers initiate due diligence early in the M&A lifecycle, reserving substantial time for issue tracking, quality assessments, and in-depth analyses.
- Advisory involvement. Advisory services amplify buyers’ risk assessment capabilities in specific industries and cross-border transactions. Advisors may engage early and collaborate closely with in-house DD teams.
- Effective communication. Seamless cross-functional communication ensures timely issue tracking, productive assessments, and efficient coordination of due diligence tasks. DD teams are advised to collaborate in a synced secure workspace for maximum results.
Exploring due diligence topics
We explore many topics in our due diligence articles, including but not limited to the following:- Best due diligence practices for buy-side and sell-side participants
- Due diligence checklists
- Industry-specific due diligence insights and practices
- Due diligence advice across business functions
- Guides and tips to conduct proper due diligence