"Due Diligence" refers to investigation into the affairs of an entity prior to its acquisition, restructuring, fund raising or other similar transaction. Due Diligence is not restricted to check the facts but also to eva

"Due Diligence" refers to investigation into the affairs of an entity prior to its acquisition, restructuring, fund raising or other similar transaction. Due Diligence is not restricted to check the facts but also to evaluate, interpret and communicate the facts so as to ensure that prospective investors make an informed investment decision. It is process of gathering information about the target company, its business and the environment in which it operates. Characteristics: A Due Diligence is an interactive process that includes: Inquiring financial and operational data. Analysing financial and operational data. Interpreting financial and operational data. Assessment of risks and opportunities. As a part of the business strategy, the Companies before making any relationship with the other party conduct the background checks of the client, customer, supplier etc. to ensure that the parties to the transaction have the disclosed the information as required to proceed with the transaction and is a process to completely understand a business capability and its past performance. After the conduct of the due diligence, a due diligence report prepared to provide information and insight on various aspects such as the risks of a transaction, the value at which a transaction should be undertaken, the warranties and indemnities that needs to be obtained from vendor etc. In any transaction, the seller does investigation of a buyer to ensure that the buyer has adequate resources to complete the transaction, as well as other business aspect covering the technical and human resource, cultural, taxation etc. which would affect the company after entering into the transaction. Key Points Describing Due Diligence: It is not limited to accounting analysis but has a business-oriented approach; Its analysis the information on the basis of the actual facts; Considers the industry of the target company; Examines the business affairs having a significant impact on the prospects of the business; Explores significant business practices and business models; Examination of relevant aspects of the past, present and near future of the business; Assesses the advantages and risks associated with a particular transaction Conclusion: While exploring any business opportunity, it is the foremost requirement for a corporate to investigate and evaluate the potential and risk associated with such business. The due diligence covers the activities relating to pre-transaction, during the transaction and post transaction exercise with all relevant aspects of the past, present, and predictable future of the any business.