The Due Diligence Process in M&A Transactions

The due diligence process involves a detailed examination of business inventory, equipment as well as financials, contracts, and intellectual property. It also involves an examination of any legal matters that could impact the acquisition.

Due Diligence plays an important role in any M&A deal because it assists investors in determining the real worth of a business. Typically due diligence involves the review of documents that are confidential to business and requiring the signing of non-disclosure or non-compete agreements. These processes must be completed in full to avoid any problems that could adversely affect the agreement, or cause it to fail.

Investors should also be looking for any concerns regarding intellectual property, including patents, disputes and licensing. Investors should also consider the company’s culture, including its severance package, golden parachutes, and stock purchase options.

The $9 billion Theranos collapse is a stark warning to conduct a thorough due diligence prior to investing. Although some of the red flags were openly obvious, it shouldn’t be an excuse to avoid this revolutionizing industries with cutting-edge technology process. Due diligence can be a time-consuming and laborious task that requires coordination between various stakeholders as well as the expertise of professionals in various areas. It is important to determine the objectives of due diligence. This will help you determine what resources are needed and how to use them. In certain instances you may have to consult with experts from outside, such as lawyers, insurance agents, financial or technology consultants.