Five Types of Due Diligence
27 August 2023If you’re contemplating the possibility of an M&A transaction, buying an equipment piece or simply bringing on a supplier, due diligence is always an integral part of the process. It is essential to feel confident about the people you do business with. This can help protect your company from any potential risk.
It’s important for entrepreneurs to be aware of the different types of due-diligence and how they can be applied to their particular situation. In this article, we’ll go over five common types of due diligence that can be used in any sector:
Financial due diligence involves examining the past financial performance of a company and making sure that the figures are correct. This includes confirming reports, assessing the underlying performance of the company, and looking into areas such as debt contracts, property, and employment.
Operational due diligence focuses on identifying the existing problems that may impact a company’s future success. Operational due diligence can reveal potential risks that are not obvious, such as an absence of real estate, an outdated technology, or an inefficient resource utilization.
Human resource due diligence is a thorough analysis of a company’s workforce. This involves examining every document and information about a company’s employees such as contracts and compensation plans, and any pending litigation. It also assesses the company’s culture in regards to its perceptions, values and working styles.
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