Due diligence

Due diligence is the research conducted prior to engaging in a business transaction.  Working through a due diligence checklist allows someone to have a full knowledge of the risks associated with a transaction. With this knowledge, one can structure the transaction to minimize risks. In many cases, the outcome of a due diligence investigation will result in the decision to pull out of a contemplated transaction entirely, usually because the representations of the seller turn out to be overstated or incorrect.

Due diligence is a major part of acquisition transactions. For example, an acquirer could review the following areas as part of its due diligence investigation of an acquiree:

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