Due Diligence is a crucial process that sets the tone for an acquisition. But how do you perform due diligence? Before we can understand how diligence gets done, we have to understand the goals associated with due diligence.
The basic concept of due diligence is finding out if the company you approached is worth buying and for how much. You, as the buyer, will need to fully understand what you're buying from different angles.
Aside from assessing its price, you should also look for risks. How compliant is the seller to specific rules and regulations? If they have pending violations, you will have to absorb all those risks when the ownership has transferred.
You also need to start building your projections. How is this company going to help your organization grow? What are the possible synergies? What will this company look like on a go-forward basis?
These are just some of the most fundamental questions you need to be answered during due diligence. But ultimately, the question that you need to answer is, should I buy this company?
With all these intricacies and details you need to watch out for, you need a team to help you do your diligence. This team is composed of a lot of lawyers and a lot of finance professionals.
You must perform diligence very thoroughly, as this will set up your integration plan that will ultimately dictate the value of your acquisition. It all starts with diligence.
Learn how to approach diligence, avoid common mistakes and build your diligence team from Ben Sutton, Corporate Development at OneTrust.