Due diligence is all over the place. It’s a part of the process we use to choose a place to live or a job, or where to eat on Saturday. A thorough home inspection prior to a purchase, a financial firm’s analysis of a potential investment opportunity or a university’s review of potential applications are all instances of conducting the appropriate research necessary for a high-risk transaction. This research allows us to set expectations and provides the possibility of contingencies should things not occur as we anticipated.
Due diligence questions typically involve a review of financial information such as profit margins, and the itemized costs of business. Inquiries about intellectual property assets, such as patents, copyrights and trademarks, are common. Knowing who owns IP rights and how they are protected can help identify legal risks for the buyer.
The buyer must examine the corporate structure of the sell side the ownership details, competition profiles, recent annual reports and ongoing business transactions and more throughout the due diligence questions and answers on due diligence process. It is also important to look into the history of any legal proceedings or lawsuits pending that could have an impact on the final outcome of the deal.
One of the best ways to make sure due diligence is conducted safely and securely is by utilizing an online virtual data room that allows for collaboration, review, and exchange of confidential documents. A VDR allows multiple parties to look over and analyze documents simultaneously, removing duplicates and increasing the overall efficiency of the process. It also reduces the possibility of losing valuable information or not understanding it correctly.