The Due Diligence Boardroom
Due diligence is the process of vetting a business entity before entering into a business contract regardless of whether it’s with a client, vendor or a third party. It’s also a pillar of good governance, calling for individuals and groups to act with the same care and attention as any reasonable person would under similar circumstances.
In the past due diligence was performed by the board of directors who would call in auditors to spend days going through files of financial documents and information. There are instances where this is necessary, but the vast majority of businesses conduct their due diligence through the virtual dataroom (VDR).
The most important kinds of information that are sought during due diligence comprise:
A complete financial history that includes previous audits, tax records and any financial assessments from external sources. This includes profits and losses, cash flow forecasts, balance sheets, and more.
Information about the products and services the company provides, including any R&D projects currently ongoing. This could include a listing of any trademarks, patents and other intellectual property.
Buyers also want to know the competitive advantage of a company that can include information like their customer base sales pipelines, sales pipelines, market reach, and more. This can be achieved by analysing a company’s previous data on these factors and by conducting interviews with existing customers.
As a seller, you should be willing and able to provide the information requested by an interested buyer. However, it’s not a matter of just giving everything away, as it is important to safeguard your intellectual property. Therefore, it’s generally recommended to set up access control to ensure only trusted partners have access to your most sensitive information.