finance
Due Diligence
Systematic verification of a business before acquiring, investing in, or partnering with it.
Definition
Due diligence is the structured investigation of a business before a transaction: acquisition, investment, major partnership. It covers financial (audited financials, customer concentration, cash flow), legal (contracts, IP, litigation), commercial (market, competition, growth), and operational (team, systems, key dependencies). For sellers, preparing for due diligence years before a sale dramatically improves outcomes - clean books, documented systems, low owner dependency all command higher multiples.
In your business
- →If you're planning to sell in 2-3 years, start cleaning up now - clean books, documented systems, low owner dependency
- →Buyers will dig deep - hidden problems get found and either kill deals or crater price
- →Hire a sell-side advisor early - they know what buyers look for