The Due Diligence Process in M&A Transactions

The due diligence process involves an in-depth examination of business inventory, equipment as well as financials, contracts, and intellectual property. It also includes an assessment of any legal issues that could hinder the acquisition.

Due Diligence plays a significant role in any M&A deal as it aids investors in determining the true worth of a company. Most of the time, due diligence involves reviewing documents that are confidential to business and requiring the signing of non-disclosure or non-compete agreements. These procedures must be completed thoroughly to avoid any issues that could negatively affect the agreement, or result in it being cancelled.

Investors should also look for any concerns regarding intellectual property, including patents, disputes and licensing. Investors should also look at the culture of the company, including its severance package gold parachutes and stock purchase options.

The $9 billion loss at Theranos is an unsettling reminder that you should always conduct thorough due diligence prior to investing. Although some of the red flags were openly obvious, it shouldn’t be an excuse to not go through this process. Due diligence can be a tedious task that takes a lot of time and requires the coordination of create a compelling due diligence report multiple stakeholders and the expertise of experts in a variety of fields. It is important to determine the objectives of due diligence. This will help you determine what resources are required and how you can use them. In some instances you might need to consult with experts from outside like insurance agents, lawyers and financial or technology experts.