What is due diligence?
Financial due diligence is an investigation into a company’s affairs on behalf of a potential acquirer or investor into a business.
This is an exercise undertaken to ascertain that the details provided by a vendor or investee company used to extract offers of finance or investment are largely correct and also to highlight any areas of material weakness in the company.
Who will request a due diligence report?
Whilst every purchaser of a business should look to undertake some level of financial due diligence on the target entity to give themselves a level of comfort, any large backers of a transaction are likely to insist on one.
This will include bankers and institutional investors who require a satisfactory outcome of due diligence before sanctioning a proposed lend.