Due Diligence is the intense examination of a target business for a merger or acquisition by a prospective buyer and it can be described as a fact-finding device to assist in determining whether to buy the business at all, how much to pay for the business and how to structure the acquisition. The principal purpose of Due Diligence is to verify assertions made by the Seller and to identify caveats that may not have been disclosed to the Buyer. It is a reasonable investigation about the state of affairs of the business to be acquired, focussing on matters which may have an effect on the future of the business. In short, the Buyer determines through Due Diligence that the business he / she is buying contains all the assets and liabilities that have been paid for.It has been suggested by Luis F Gillman that the following nine fields ought to be investigated in any comprehensive Due Diligence:
1. Compatibility audit
2. Financial audit
3. Macro-environmental audit
4. Legal - environmental audit
5. Marketing audit
6. Production audit
7. Management audit
8. Informations systems audit
9. Reconciliation audit
According to Gillman a recent survey revealed that 70% of mergers and acquisitions have failed to add shareholder value. A properly conducted Due Diligence could reduce this high failure rate. Due Diligence is not a process of valuation of a business.Over the years we have carried out many Due Diligence audits and most of the leading Business Brokerages recommend our services.
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