Due diligence is a process of detailed examination of a company, which is carried out before making important business decisions, such as a company purchase, investment or merger. The aim of this process is to verify the legal, financial, tax and operational situation of a given entity, which allows to identify potential risks and hidden liabilities. The most common types of due diligence include: legal due diligence, financial due diligence, tax due diligence, intellectual property due diligence, environmental due diligence and commercial due diligence.
Due diligence is most often conducted by specialized teams of experts including lawyers, tax advisors, financial auditors and business analysts, acting on behalf of the investor or seller to assess risks and confirm key information related to the transaction.
Legal due diligence process involves analyzing the legal aspects of a company’s operations by collecting and evaluating documents and information that are important from a legal perspective. The scope of the examination may include all documentation or selected parts of it, depending on the needs and nature of the transaction.
The most frequently verified areas during legal due diligence process include intellectual property rights, compliance with legal regulations, personnel issues, including employee contracts and organizational structure, concluded commercial agreements, ongoing or potential litigation, financial and tax liabilities, as well as the registration and organizational status of the company. Depending on the specifics of the analyzed activity, the scope of the legal compliance may be extended to include additional elements.
In turn, financial due diligence focuses on assessing the economic condition of the company and eliminate any potential financial risks. Financial records such as current and historical financial statements, financial health, financial data, income statements, the structure of revenues and costs, the level of debt, as well as the compliance of tax settlements are analyzed. The aim is to assess financial liquidity, profitability and detect any arrears to offices or contractors. To sum up, the financial due diligence checklist includes among others analyzing financial documents and identifying financial risks that may affect the value of the transaction or the investment decision.
A properly conducted due diligence identifies risks and allows the investor to make decisions based on the actual image of the company, protecting it from losses and unforeseen problems after the transaction. GLC can comprehensively support the due diligence process by analyzing the legal, tax and financial risks associated with the planned transaction, which will allow you to make an informed investment decision. Our experts conduct a detailed verification of the documentation.