Due Diligence is the intense examination of a target
business for a merger or acquisition by a prospective buyer and it can be
described as a fact-finding device to assist in determining whether to buy the
business at all, how much to pay for the business and how to structure the
acquisition. The principal purpose of Due Diligence is to verify assertions
made by the Seller and to identify caveats that may not have been disclosed to
the Buyer. It is a reasonable investigation about the state of affairs of the
business to be acquired, focusing on matters which may have an effect on the
future of the business. In short, the Buyer determines through Due Diligence
that the business he / she is buying contains all the assets and liabilities
that have been paid for.
Following fields are invariably is investigated in any
comprehensive Due Diligence:
• Compatibility
audit
• Financial
audit
• Macro-environmental
audit
• Legal -
environmental audit
• Marketing
audit
• Production
audit
• Management
audit
• Information
systems audit
• Reconciliation
audit
More specifically, a due diligence audit is performed to
help a buyer understand details of the development process, degree of
regulatory compliance, etc. of a target company. Due diligence audits are often
performed in conjunction with the legal staff of the acquiring company.
In the recent past the corporate houses are looking for
professional firms to verify, assess, investigate the viability of operations
of there braches / associates / franchise to make them independent profit
center at minimum possible cost
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