Due Diligence

As you begin evaluating the businesses either to buy or invest, there are many factors to be taken into the accounts to verify and value the business and examine the status of the business. It is an evaluating process for a prospective business decision by getting information about the financial, legal, and other material information of the business. The information is right from the business incorporation status, stake holders, current business position in terms of Assets, Liabilities, Inventory, Cash, Legal obligations, and other documentation checklist.

This process involves visiting the business facility, meeting with the employees, contacting the customers and suppliers, doing a physical check of any inventory and inventory valuation. Taking stock of Assets, fixtures and furnitures, vetting all the contracts and legal documents. Reconciling the books, tax returns, financial statements, Sales records. Confirmation of Receivables, payables and other liabilities. Market evaluation like customer patterns, marketing strategies, competitors and business position in the market. Business's reputation and employees relationship etc.

It is strongly advisable to do a due diligence exercise to avoid any surprises. undisclosed risks, hidden liabilities or onerous commitments are latent in most acquisitions. Due diligence process can help to identify deal breakers, better analyse financial and business operational health, set negotiation parameters, challenge synergy and valuation assumptions, and assess risks.

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