Due diligence is about gathering enough information to make an informed business decision regarding risk vs. reward of a given business opportunity.
At Doherty & Associates, our experienced team accesses the risk and identifies any potential red flags. Further, we help to define key performance indicators (KPIs) to watch going forward. Due diligence cannot eliminate risk. There is an inherent risk in all business transactions. However, we can assist the decision maker in understanding the potential of a given transaction.
Due Diligence – Business Transactions and Corporate Finance
We help clients develop or fine-tune their strategy and business planning process, by providing both internal and external diligence. Results include a company mission, a focused business plan for future growth and profitability, and funding proposals and introductions.
Due diligence takes different forms depending on its purpose:
- The examination of a potential target for merger, acquisition, privatization, or similar corporate finance transaction normally by a buyer. (This can include self due diligence or “reverse due diligence”, i.e. an assessment of a company, usually by a third-party on behalf of the company, prior to taking the company to market.);
- An assessment of a startup venture, its team and its potential in the market for investment;
- An examination of ongoing operations to determine viability, efficiencies, compliance and opportunities;
- A gathering of information useful for valuing assets, defining representations and warranties, and/or negotiating price concessions;
- An assessment of valuation and shareholder value.
Due diligence should begin to answer the question: Does this investment have the potential to generate the kind of return I expect and what could potentially undermine achieving a positive outcome? It is essential to determine whether the rewards outweigh the risks. And while we cannot guarantee the outcome of any particular investment, our goal is to ensure that you have all the information you need to assess risk accurately.
How Much Due Diligence Needs to Be Conducted?
There is no correct answer to this question. The amount of due diligence conducted is based on many factors, including prior experiences, the size of the transaction, the likelihood of closing a transaction, tolerance for risk, time constraints, cost factors, and resource availability. It is impossible to learn everything about a business, but it is important to learn enough so that you can understand the risks involved and make good, informed business decisions.
Due diligence is about gathering enough information to make an informed business decision regarding risk vs. reward. Whether you are considering buying a business or making an investment, conducting due diligence ensures you have access to important information about the business. It’s the best way for you to assess the value of a business and the risks associated with buying it.