Due Diligence is simply the process of a buyer investigating the details of a business. This may include both discovery of previously undisclosed information about a business and the verification of information already presented. During Due Diligence a Buyer will typically look at all aspects of a business including the market for the company’s products and services, the characteristics of the products and services, how the business is marketed, the sales process, operations, purchasing, information on customers, personnel, and financial performance and reporting.
At Codiligent we answer most of the high level material buyer questions in the confidential information package. This enables formal due diligence on Codiligent-represented businesses to be primarily a verification process, rather than a discovery process. Many business brokers don’t do this, and the result is that there is too much discovery of new information in due diligence causing buyers to either terminate the transaction or re-negotiate price and terms as a result of learning new previously undisclosed information.
Following is a webinar put on by USC’s Marshall School of Business on September 18, 2009 that discusses Due Diligence. While this information is geared toward buyers of larger businesses, it will provide a better idea of what buyers look at when conducting Due Diligence.