What is Due Diligence?
During a funding transaction or acquisition, investors or acquirers will perform due diligence — the examination of materials relating to a company’s operations, financial condition, and management.
Companies looking for investors or buyers must find and organize the key corporate documents and information required for due diligence; this is a very time-consuming endeavor, and most likely takes executive management away from their daily efforts of developing the company. Continuous diverted attention from these standard business practices creates inferior company focus, stalled development, and could jeopardize favorable outcomes for stakeholders.
Actually delivering the due diligence materials to the potential investor or buyer is another time-consuming and arduous task. The volume of documents required is frequently quite large and physical delivery can be tedious and expensive. Email delivery is not an ideal option, as there are other risks associated, such as materials being intercepted, lost, files being too large to receive, etc. So, what is the right choice when preparing for due diligence?
Preparing for Due Diligence
- Consider using an online portal, deal room, or virtual data room,
- Consider employing due diligence consultants,
- Be prepared. Investors will ask questions.