Due Diligence means proper investigation of a business; or verification or research on the accuracy of a statement required in a corporate transaction with a certain standard of care. The investigation includes an audit of investment, review of all financial records, verification of legal matters, etc. It specifies how much effort is required by law. It contributes to informed decision making by providing ample information to the decision makers. It helps in evaluating a target company or its assets for merger or acquisition.
At times the process may seem to be never-ending; however, if the investigation is done properly and in an organized manner with the routine course of action, it can be hassle-free. It includes reviewing documents which might incur liability for the company including sales agreements, purchase agreements, liens on assets, examining documents relating to any on-going or potential lawsuits, and recent litigation, that has concluded and so on.
The process of due diligence involves several investigating steps, such as—
- Analysis of the total value of the company
- Profit, revenue and margin trends
- Competitors and industries
- Management and share ownership
- Balance sheet assessment
- Valuation Multiples
- Stock price details
- Assess long-term and short-term risks
- Dilution possibilities and stock option
Contract management plays an important role while undergoing due diligence since it helps in furnishing requested information in no time. With the online process, it facilitates easy accessibility, organizing, sharing and monitoring of information. It includes relevant areas like legal, financial, IT, environmental, marketing, commercial, tax, labor, etc. and impacts on several aspects of a business transaction, such as warranties, negotiation, indemnification, purchase price, etc.
Gracious offers a wide range of corporate legal services including due diligence. We have the expertise to perform a thorough due diligence on all the legal aspects of the business, by reviewing all the records and documents.