The due diligence process involves an exhaustive examination of the equipment, inventory as well as financials, contracts, and intellectual property. It also includes an examination of any legal matters that could impact the acquisition.
Due Diligence is a vital element of any M&A transaction, and it assists investors in determining the true value of a business. Typically due diligence involves the review of confidential business documents and requires signing of non-disclosure and non-compete agreements. It is vital that these steps are thoroughly followed to avoid issues that may negatively impact the deal or even result in it being canceled.
Investors should also be aware of any concerns related to intellectual property, such as patents litigation, licensing, and disputes. Investors should also consider the culture of the company which includes its severance policy golden parachutes, severance package, and stock purchase options.
The $9 billion Theranos https://eaglerockenergy.com/create-a-compelling-due-diligence-report/ collapse is a stark reminder of the need to conduct a thorough due diligence prior to investing. Although many of the red flags were openly obvious, it shouldn’t serve as an excuse to avoid the process. Due diligence is a time-consuming, tedious task that requires coordination between different stakeholders and the expertise of experts in a variety of fields. It is essential to identify the purpose of due diligence. This will help you determine what resources are required and how to use them. In some instances it is possible to engage outside experts like lawyers, insurance agents advisors, financial or tech experts.