Dernière modification le 12/12/2022 à 10:16 par Kate Griss

Due diligence is an acquisition audit performed by an investor or a potential buyer before any investment. This verification procedure is carried out in order to know the strengths and weaknesses of a company before proceeding with the transaction.

The due diligence allows the future buyer or investor to have a clearer idea of the company’s situation. In particular in terms of its fiscal, social, accounting, environmental, strategic, legal, commercial situation, etc. It takes place during a fund raising, a merger, an acquisition, a business transfer or a share purchase (or other equity).

Why set up a due diligence?

This verification process makes it possible to limit the financial risks and to verify several essential elements about the company:

• The financial evaluation of its value
• The consistency of the sale price, the balance sheet, the costs, the business plan
• Its growth
• Possible hidden defects such as financial losses, tax fraud or money laundering operations
• Its profitability
• The credibility of its performance indicators

With all this information, you may be able to renegotiate the price, reassess the contractual guarantees or even cancel the transfer. This will obviously depend on the revelations of the acquisition audit.

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