Due Diligence is a comprehensive examination of a company conducted by a potential buyer before an acquisition. Various aspects of the company are analyzed, including finances, legal obligations, customer contracts, employee relationships, and market position. The purpose of Due Diligence is to identify risks and determine the actual value of the company.

A specific form of Due Diligence is Vendor Due Diligence, in which the seller commissions the review themselves. The goal of Vendor Due Diligence is to provide potential buyers with comprehensive information before the sales process begins, increasing transparency and speeding up the transaction.

Main Areas of Due Diligence:

• Financial Review: Analysis of balance sheets, revenues, expenses, and tax obligations.
• Legal Review: Examination of contracts, licenses, and potential legal risks.
• Market Review: Assessment of the company's market position and competitiveness.

Example:

A buyer evaluates an e-commerce retailer to ensure that all customer contracts are valid and that there are no outstanding legal disputes before purchasing the company. In a Vendor Due Diligence, the seller conducts this review in advance and provides the results to potential buyers.