General
due diligence
What does due diligence mean?
The forensic pre-deal check. Buyer's bankers, lawyers and accountants tear through the target's contracts, financials, IP, litigation, HR files, everything. Goal is no surprises after the wire goes out. Lives in a virtual data room these days.
"DD turned up a tax exposure in Brazil, repriced the deal 15%."
Origin
Term codified by the US Securities Act of 1933, which gave broker-dealers a 'due diligence' defence against liability if they'd properly investigated an issuer.
Frequently asked questions
What does due diligence mean?
Due diligence is the thorough investigation a buyer carries out on a target company or asset before signing a deal.
How do you use due diligence in a sentence?
"We can't make an offer until due diligence turns up their real numbers."
Why is due diligence important?
It lets the buyer verify what they're actually purchasing and uncover risks or liabilities before committing to the deal.
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