Business Due Diligence – The Checklist

The technical terminologies usually leave us baffled; and business due diligence happens to be one of them. While you are investing capital in a startup or purchasing a new entity, experts recommended that you conduct a due diligence investigation as a protective measure. Making it simple, due diligence means that you investigate the status or the background of an entity or a person you are considering doing business with. It comprise of several legal assignments, obligations, reports and investigations.

Image of business contract on background of two employees handsh

Below is the vital checklist that will help you conduct an appropriate due diligence before you invest in an entity.

Business History

Just as you are going to investigate the history of an individual, it is imperative that you probe into the antiquity of a business. This classification comprises of asking question about the owners, the date of establishment, inquiring about the ownership changes if any have occurred, the trading history in terms of sales, cash flows and any ups and downs that have affected the business.

Employee Details

Employee details are generally requested as a vital aspect of the business due diligence practice during a merger or an acquisition. The details you can ask for may include the list of the employees, their job roles, credentials, benefits, pay, bonuses and incentives. It also comprise of the contracts and agreements signed between the employees and the authorities. The employee handbook should also be provided which includes the details about the overtime, vacation and sick time policy.

Legal Issues

There are some legal concerns as well that you need to be aware of. Legal issues comprise of the criminal and civil cases at the personal as well as the business level. At the business level it involves asking questions about the business’s involvement in any legal proceedings, the standing of the business and the outcomes of the legal issues.

Assets and Financial Details

You can ask the business to provide you with a list of their current assets. The most common assets is the real estate and other include the shares, bonds, equipment, vehicles and foreign currency investments.

Being a prospective buyer or an investor of a business, it is your right to opt for the financial information of the operations. You can ask the company to provide you with the financial details or the credit reports for the last 3 to 5 years.

Private Investigators To Help!

Whether a larger business is to take over a small one, you can hire professional private investigators to do the research on your behalf for the specific business. With due diligence, you will be able to uncover all the secrets that prevent you from facing any sort of unnecessary issues in the future.