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Types of Due Diligence

The word “due diligence,” while it may not get the heartbeat going, but it is a vital business practice when selling or buying companies. Due diligence is the process of examining the company from every angle to ensure that all participants have a clear understanding of the stakes.

The process can take 30 to 60 days, however it should begin as soon as possible to avoid miscommunications and legal ramifications. Companies should prepare for the process by creating an inventory of documents that include all relevant documents and documents. This will help save time and money during the actual investigation.

There are different types of due diligence, depending on the nature of deal and business. Here are some of the most popular:

Legal Due Diligence

This type of due diligence investigates any potential liabilities that could impact the outcome of a deal. It usually involves examining all the material contracts, including licensing agreements, partnership and term sheets, as well loan and bank financing agreements.

Commercial Due Diligence

This includes analyzing the market position of the company by its size, growth and competition. This may include conducting interviews with customers as well as assessing competition, and preparing an extensive analysis of the company’s strengths and weakness.

This type of due diligence investigates all the information available on the possibility of a case, including any evidence against an suspect. It also involves analyzing the information regarding exulpation that is available. This is what a prosecutor does when considering whether to press charges against anyone.

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