Due diligence is an essential element of any investment, partnership or business deal. It’s an exhaustive examination of all aspects of a firm, including its financial records, compliance with laws and potential risks.
A due diligence checklist can be used to guide conversations, pinpoint obstacles to M&A deals quickly, and enable stakeholders to focus on structure, strategy, and execution. By ensuring that all parties are on the same page regarding the scope of investigation and required documentation A due diligence checklist is an effective tool for reducing risk.
The due diligence request may include different documents based on the nature and size of the transaction. All M&A due-diligence documents should contain the following basic elements:
The majority of M&A due-diligence reviews require thorough financial reports for the last three years. These documents provide an accurate picture of the target company’s financial status and help identify areas for growth.
Other items to consider include the financial obligations of the target as well as its capital structure. Additional areas of focus might be a review of internal processes, supply chain, the technology infrastructure and management team.
A complete due diligence checklist will also look at a company’s environmental safety and health practices, including any regulatory violations. It should also examine the company’s stance on intellectual property rights, and how it plans to deal virtual data rooms in due diligence with a data breach. Finally the due diligence assessment should examine the company’s disaster recovery strategy and contingency measures.