What’s due diligence?

Just like when you and your mates channel your inner-detectives to scope out a new potential beau, companies do the same.

What's the key learning?

Due diligence is when companies conduct an investigation, or an audit, into another company before they engage in a transaction (like a merger or acquisition)
Due diligence can involve looking through a company’s corporate records, balance sheets and more
Outside of M&A, due diligence can also be things like doing a background check on a potential employee

Picture this: you’re about to go on a blind date. So what do you do? You and your mates get your inner-detectives and scope out these potential partners on social media.

Well, guess what. Companies do the exact same thing before they sign deals.

In the biz world, due diligence is when companies conduct an investigation, or an audit, into another company before they engage in a transaction (like a merger or acquisition).

Due diligence can involve looking through a company’s:

Corporate records
Balance sheets
IP contracts
Stockholder information
History of litigation (aka if they’ve been involved in any lawsuits).

Outside of M&A, due diligence can also be things like doing a background check on a potential employee. Or, if you’re an investor, it means doing your own research about a stock before you invest in it, aka:

Checking a company’s revenue and profits
Looking at its market cap
Checking who its competitors are.

You can think of due diligence as basically doing your homework before you make a move.

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What’s due diligence?

What's the key learning?

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