![]() You may also come across information that changes your understanding of such areas as the company’s financial prospects or its market position. Look at the time and money spent on due diligence as an investment that could yield significant dividends: It helps ensure a beneficial transaction and easy transition. ![]() “It’s going to take some time to do it properly,” Meloche says. Don’t make the mistake of hurrying the process or trying to cut corners or costs. Start by setting out the process you’ll follow for due diligence. “You’re trusting what you’re being told by the other side, but you're also verifying, making sure the numbers match the reality on the ground.”ĭue diligence can be broken down into three steps for you to take. “Due diligence is about trust-and verification,” Meloche says. Financial due diligence, often referred to as accounting due diligenceĪ key part of the process is validating the vendor’s information about the company.Commercial due diligence, sometimes called business due diligence.There are three types of due diligence (detailed explanations below): “Due diligence allows you to test your initial expectations, make sure there are no major red flags and confirm that your initial valuation and LOI still makes sense,” Meloche says. The vendor provides comprehensive commercial, financial, legal and other information so the buyer can understand how the business works. Why conduct due diligence?ĭue diligence allows the buyer to gain a much more detailed understanding of the business and confirm that the acquisition is a good idea. (The two earlier steps are identifying the target company and signing both a letter of intent-LOI-to buy it and a confidentiality agreement to allow any sensitive information to be shared.)Īs part of the LOI discussions, the vendor typically shares basic information about the business to let the buyer see if the target fits their business strategy. Growth & Transition Capital financing solutionsĭue diligence is the last of a business acquisition’s three key steps before you negotiate a purchase agreement. Kauffman Fellows Program Partial Scholarship Venture Capital Catalyst Initiative (VCCI) Industrial, Clean and Energy Technology (ICE) Venture Fund
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