29 Aug 2022

A Deeper Look at Corporate Due Diligence

The process of due diligence is conducted when an organisation or individual is considering a potential merger or acquisition by undertaking an extensive risk and opportunity evaluation of their business. Through the course of the procedure, a large amount of data, from all areas and aspects of the business is gathered. Post that, the investigators focus on confirming the accuracy of the reports and assessing whether the transaction is viable.  

Since due diligence is an exhaustively expansive activity, it’s been segregated into multiple categories. The relevance of each varies based on the type of transaction as well as the industry. However, all of them have the same end goal, which is to provide organisations with the intel they need to make an informed decision about the potential transaction.

Listed below are the types of due diligence processes that are conducted in the corporate world. 

  1. Financial: The process of financial due diligence is absolutely crucial to assess the financial health of the business one is planning to associate with. From reviewing financial statements, assets, debts, etc. to determining whether they’re accurate, the investigator does it all. The main agenda here is to establish future forecasts with all potential risks taken into consideration
  2. Legal: Before entering into a merger, corporations are strongly advised to perform a legal due diligence as well. This helps them discover and assess any potential liabilities that could impact the success of the transaction. This process essentially involves the examination of material contracts such as partnership agreements, guarantees, licensing, loans and other financial agreements
  3. Commercial: Also referred to as market due diligence, this step is important to tactically validate the opportunity in hand. During this process, investigators look at the market size and share, customer base, competitors and future returns, in order to assess if the deal is financially viable
  4. Human Resources (HR): This type of due diligence covers all documentations related to the employees as well as the management. HR due diligence is conducted with the intention of getting a complete picture of the company’s culture and functioning. It helps identify all employee-based risks, while the transaction is underway. While performing HR due diligence, the investigator also analyzes employee contracts, salary details, policies, benefits provided by the organisation, along with problems and grievances faced by both the management as well as the workforce
  5. Intellectual Property: IP due diligence is a thorough investigation of both the quality and quantity of the potential organisation’s IP or intellectual property assets. Though IP assets are intangible, they’re key contributors to the corporation’s overall value. It also distinguishes them from their competitors
  6. Informational Technology (IT): IT due diligence is an audit of a potential partner’s IT processes and infrastructure, with a deep focus on security evaluation. It allows businesses to evaluate their target company’s current IT structures, understand how sensitive data is stored and protected, and discover potential risks in their overall security system

Some other forms of due diligence include commercial, operational, tax, and environmental. Each of them are used to perform a very specific type of investigation that could help the acquiring business come to a conclusion about partnerships. 

At GDA, we have skilled investigators who specialise in multiple types of corporate due diligence. They’re trained to strategically collect data and information, assess them, and finally present reports to the clients that could potentially assist them in taking well-calculated decisions. 

To know more about corporate due diligence, visit our website: https://www.globedetective.com/