Analysis On Due Diligence

Pranay Singha, Department of Law, University of North Bengal, Siliguri, India

ABSTRACT

Due diligence is a crucial business technique that involves conducting a thorough investigation of a company's economic, legal, tax, and financial situation. This includes factors like sales data, shareholder structure, and potential links to economic crime. A due diligence audit helps companies verify the assumptions and terms of a mutual relationship or offer, determining the risks associated with them. The three main purposes of due diligence are to get a working understanding of a potential target's business and operations, estimate the target's value, and identify risks associated with the potential acquisition or investment.

Advertising a business deal requires extensive research into the company, and a comprehensive due diligence process can help ensure that both parties are aware of the documents that may influence the outcome of the transaction and create a loss for the seller. The process involves an in-depth review of the target's business with the help of legal, financial, tax, and other advisors. The duration of a due diligence review process can vary depending on the size and intricacy of the target's business and the proposed transaction. The communication between the acquirer's advisors and the target will remain on-going until the acquirer feels confident that it has thoroughly examined the target, as demonstrated by a comprehensive understanding of its business and satisfactory answers to all due diligence inquiries and follow-up inquiries.

Keywords: Business, Due diligence, financial situation, Mergers and Acquisition, Private equity, Tax