Due diligence is the investigation of a potential investment or individual to confirm that all facts, financial records, adverse media or anything else that may be relevant are present before making a commitment to any business relationship. Typically, a business that is in the process of acquisition would be the subject of reputational due diligence to ensure that the buyers interests and brand name are protected from any damage later caused by undisclosed financial issues or information that had been withheld.
Consider the following scenario:
A multinational telecoms company begins the process of the acquisition of a smaller business. As part of the due diligence investigation, it is discovered that the Managing Director of this business had not only been found guilty of sending millions of spam emails to unsuspecting customers whilst running another, now dissolved company, but that they were also under investigation for various bad selling practices.
With full knowledge of these facts, the multinational company reviews their options:
- Walk away from the acquisition entirely, having avoided a minefield of potential problems.
- Negotiate new terms of the acquisition in the light of this information, and cautiously proceed with the acquisition.
- Continue with the buyout as planned, under the provision that the Managing Director steps away from the business in a controlled manner.
A thorough Due Diligence investigation can save your company time and money, not to mention protecting you from potential future problems caused by undisclosed company information.
Here at Security Watchdog we have an experienced Due Diligence team dedicated to making sure you only deal with companies with integrity.