Regardless of the use case, due diligence is a crucial step that can safeguard your company from costly mistakes and risks. Due diligence can be divided into various activities, including background checks, risk assessment and intellectual property records review, compliance check to ensure that the target entity is in compliance with laws and regulations and also inspections and visits to the site, to verify the accuracy.

It is essential to establish an investigative team with an executive or project manager who can oversee the entire process. While you can depend on in-house resources, outsourcing to niche-specific or industry consultants is often the most effective approach to ensure a fair and impartial investigation.

While the type of due-diligence you do will depend on the circumstances and the particulars, there are some key areas to take into consideration:

The goal of your investigation will play a significant role in determining how thorough your research is. If you’re looking at a new partnership or business relationship, you should define the objectives of the relationship to ensure that your due diligence focuses on ensuring you be able to benefit.

Financial due diligence is a vital element of all investigations. It includes checking profit margins in comparison to the costs of fixed and variable, and examining internal control processes. Legal due diligence analyzes all aspects of the legal status of a company and focuses on any litigation pending or ongoing and non-compete agreements. Intellectual property due diligence involves examining the trademarks, patents, and copyrights to find any violations. The tax due diligence focuses on the tax position of the company and strategies to assess whether there are any unrecognized tax liabilities.

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