Due diligence investigation is a phrase which varies in meaning among different business organization and industries. From the perspective of a venture capitalist or a private equity investment manager. It is about assessing the business model, conducting market research and talking to the market. For an Accountant it may be analyzing the books & records.
For an investigator’s perspective, a due diligence investigation is utilized to assess the character, integrity and reputation of potential business partner(s) or key player(s) in a venture before the client enters into a substantial financial relationship.
A due diligence investigation is conducted to assess the qualification & track record of the people involved in the deal to identify potential inconsistencies, misrepresentations, omissions or controversies in their backgrounds..
These investigations are generally carried out before any transactions takes place or before merger, acquisition, formation business partnership or strategic partnership or significant investment or financial arrangement.
Due diligence investigation are typically conducted on behalf of small or medium size business, large corporations, investment banks, private equity firms or other investors who are far away not having access to all the details who they are dealing with. In many cases, the investigation is initiated by a legal team involved with the deal in order to protect the integrity of the information.
Information that is typically covered in a due diligence investigation includes the following.
Personal and professional history, which includes work history, board members and profit affiliation.
Historical new media research on the individuals and business with which they have been affiliated.
Details of civil litigation and criminal case history, including on - site court research and retrieval, where applicable.
Regulatory records, professional licenses and government compliance checks
Financial history, which includes personal assets, judgments, liens, bankruptcies and court cases.
Corporate affiliations, political contribution records.
Credit History (with consent)
In addition to the above, a due diligence investigation can include interviews with references, sources or relevant parties.
The information that is included in due diligence are some of the most common issues that are revealed are as under –
