Due Diligence and Different Types of Due Diligence
Due Diligence is one of the most feared words in the Startup & Mergers and Acquisition Industry. Usually, any investment involving a large sum of money is preceded by a due diligence.
Let us look at the some of the different types of Due Diligence
- (A) This is a review of the company’s previous and current financial financial position.
- (B) The reasonableness of future projections may also be assessed.
- (A) Where an acquisition involves a technology company, a technology due diligence is important.
- (B) This is an assessment of the technology, software, products and related systems and practices.
- (A) This is an assessment of the regulatory compliances, potential liabilities and legal pitfalls that the target company is exposed to.
- (B) For large M&A transactions, legal complications with the proposed transaction are also examined. (Anti Trust for example)
- (A) Accounting due diligence is primarily focused on checking whether the books are prepared as per statutory norms.
- (B) Tax Due Diligence helps in identifying potential tax upside to the transaction, un-provisioned tax liability and also in determining an appropriate acquisition structure.