Diligent verification or "due diligence" is a legal term used to refer to all the verification procedures to be carried out on a person or a company before signing a contract or a financial agreement with them. It is a procedure of multiple examinations that is commonly carried out in the context of mergers and acquisitions or for the takeover of a company.
“Due Diligence”?
For an individual or a company wishing to invest, the fact of carrying out due diligence serves to assess the following points:
- the degree of judgment,
- the degree of caution,
- the degree of care,
- the degree of firmness,
- the degree of action,
The objective is to guard against any adverse event that could occur once a transaction or a contract has been recorded. Preliminary assessments are carried out in various areas: strategic, IT, tax, environmental, accounting, etc.
Due diligence is a voluntary act of prudence by an investor.The fact of undertaking checks on a new partner on one or more aspects of its management is not obligatory and falls under the precautionary principle.
On the other hand, there is a verification procedure similar to the principle of due diligence but which is imposed by law. This is the duty of care.
These are, in fact, legal requirements that are mandatory that make it possible to identify an interlocutor and the origin of all his resources.
This search for information is mandatory for all credit institutions and all fundraisers.
For this reason, you must be particularly vigilant because your bank may, during its duty of vigilance, discover severe acts of corruption or money laundering in connection with the company with which you are linked. It will be too late, the bank must report you to the FBI for bank fraud, and the bank will delete your accounts!
What are the risks that buyers generally want to assess?
Economic risks: it is necessary to determine a reasonable purchase price, verifications concerning patents, software, materials, or others must be carried out to acquire the company at its fair price.
Financial risks: it is essential to know all the company's financial information to avoid unpleasant surprises. Verifications regarding possible debts or off-balance sheet commitments can be carried out.
Reputational risk: it is recommended to check the links of a company between its customers and partners and investigate any questionable practices that could jeopardize the investment of its acquirer.
Legal risk: it is necessary to check compliance with the regulations in the countries where the company is established and be aware of any proceedings or disputes in progress.
What are the different forms of due diligence?
● financial due diligence,
● market due diligence,
● commercial due diligence,
● environmental due diligence,
● human resources due diligence,
● technical due diligence,
● due diligence for intellectual property,
● strategic due diligence, etc.
These forms of due diligence answer questions that the future buyer must ask themselves. This allows him to visualize risks that would have been hidden.
It is recommended to carefully assess and investigate different forms of due diligence within a company to avoid unpleasant surprises.
An investment made too quickly and without precise analysis can be dangerous for the acquirer, who could face legal problems or weaken his structure in the event of a merger.
Methodology in a due diligence file made by our certified investigation firm:
1: Collection of information provided by the client and analysis of needs.
2: In-depth searches through specialized digital tools and subscriptions.
3: Specific field research (interviews, monitoring, administrative checks, etc.).
4: Credibility assessments and data salience.
5: Relational connections.
6: Context and analysis.
7: Written and detailed report of all of our verifications.
Do not hesitate to contact Universal Investigations agency experts in the investigation to discuss your needs and expectations in this area. Barring exceptions, our quotes are free, and we can intervene in many areas.
For more information on how to retain a Miami Private Investigator, contact Universal Investigations Agency, Inc. today at (954) 305-6275
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By Victor Elbeze, Lead Investigator & Owner of UniversalInvestigations Agency, Inc.
