Types of Due Diligence

Due diligence is not an expression that will get your heart racing but it’s an essential business practice when selling or buying a business. It involves looking into all aspects of the company to make sure that all parties involved have a good understanding of what they’re getting into.

The process can take anywhere from 30 to 60 days, but it should be initiated as quickly as possible in order to avoid confusion and legal implications. Companies should prepare for the process by creating an inventory of documents that include all relevant documents and records. This will save time and money during the actual investigation.

There are different types of due diligence, depending on the nature of deal and the business. Here are some of the most popular:

Legal Due Diligence

This firmex type of due diligence examines the possibility of liabilities that could affect the performance of a transaction. It usually involves careful examination of all material contracts that are related to licensing agreements partnerships, term sheets and loan and bank financing agreements.

Commercial Due Diligence

This involves evaluating a company’s market by its size, growth, and competition. This could include interviews with customers as well as assessing competition, and preparing an analysis that is more thorough of the company’s strengths and weakness.

This type of due diligence examines all information available regarding the case at hand, including any evidence that could be used against an accused person. It also requires assessing all the exculpatory information that is available. When deciding whether to file charges against someone, a prosecutor will take this step.