The only time due diligence is legally required is when the purchase dealing is between a broker and a buyer. Due to the many technical details that need to be reviewed for due diligence, the process is usually conducted by a legal team and accountants. Aside from finances, the capital is assessed, employees reviewed and if it is a business then its corporate strategy and place within the market is looked into, as well. The investigating party, either the buyer or seller, looks into the financial history, current financial situation and the financial prospects. Finances are an obvious aspect to investigate. The usual time given for due diligence is 30 days. In case the purchase concerns a business then the seller might be checking what the possible intentions of the buyer are and whether the buyer can successfully continue the business.ĭue diligence is an extensive process because every aspect of the asset or business needs to be cross-checked against the information provided during the purchase negotiations. This may occur when the seller wants to ensure that the buyer has all the necessary resources to fulfill the purchase deal. The buyer will should also ask why the seller wants to sell and whether this motive matches with the findings of the due diligence.Īlternatively, due diligence is performed by the selling party instead of the buyer. It is vital for the buyer that due diligence is performed before the final contract is signed so that the buyer can uncover any factors that influence whether the purchase deal is a good decision or not. The intent-to-purchase is essential for the seller because the buyer is given access to internal sensitive information that the seller would otherwise not expose to a third party. The timing of due diligence is important to both the buyer and the seller. Due diligence occurs after the intent-to-purchase has been signed but before the final contract is drafted and signed. Due diligence is the extensive review of an asset or business after a buyer and seller have already come to a purchase agreement.
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