Are you thinking of entering a business deal with another person any time soon? Before you conclude a deal with the other party, whether it’s your friend or a complete stranger, one of the best practices you can do is to conduct your own due diligence investigation.
But first, what is due diligence and how can it help you achieve positive outcomes in your business dealings? Read more to find out.
Due diligence investigations are a necessary step in ensuring you’re entering a business deal with a trustworthy person or company. The information you gather from due diligence helps you identify risks and whether or not the transaction is worth pursuing. The bottom line is: due diligence investigations allows you to make informed decisions about the deal before entering a contract with the other party.
You can perform a due diligence investigation in any type of business deal. That includes investing in a company, mergers and acquisitions, partnership deals, and joint ventures. Due diligence investigations are also helpful if you’re purchasing any kind of real estate property.
A due diligence investigation is especially helpful if you have any uncertainties about a business transaction, whether it’s about the state of the business itself or the people you’re dealing with.
Frequently asked questions
To gain more understanding of due diligence, here are some of the most commonly asked questions about such investigations.
Q: What do you get from a due diligence investigation?
A: A due diligence investigation enables you to access accurate information about the parties you’re dealing with in a business transaction. That includes potential gains and risks, cost/benefits ratio, and even information about the people in the company’s upper levels of management. In addition to helping you make informed decisions about the deal, due diligence also helps you understand the scope of the deal, as well as determining whether it’s a good move for you or your company.
Q: Can due diligence investigations unearth shady dealings?
A: Yes. A due diligence investigation comprehensively done can identify a person or a company’s run-ins with the law. That includes the history of litigation and any signs of illegal activities. All such information gleam from reliable resources, such as corporate filings and government records.
If you’re about to enter a deal with a company that’s got something to hide, a due diligence investigation can save you from a potentially disastrous transaction.
Q: What can happen if I don’t exercise due diligence?
A: If you choose to forego a due diligence investigation before entering a business transaction, you risk opening your doors to a number of issues. Problems you might encounter include fraud, financial ruin for you or your company, and even the loss of your reputation.
Q: What are the examples of due diligence investigations?
A: Due diligence investigations are more common than you think. One of the most common due diligence investigations is when a company requires pending applicants to submit employment references and their respective NBI clearances. It helps the company (otherwise known as the employer) to determine whether the applicant can be an invaluable asset to the organization.
Learn more about due diligence in the Philippines. Browse our blog or contact Duran & Duran-Schulze Law at [email protected] or (+632) 478 5826.