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Who Conducts Due Diligence?

In today’s fast-paced business landscape, conducting due diligence is a crucial step in ensuring a successful merger and acquisition (M&A) process. But who can perform this critical task?

Internal Teams

Companies often rely on internal teams to conduct due diligence. These teams typically consist of employees from departments such as:

  • Finance
  • Legal
  • Human Resources (HR)
  • Operations

Their deep understanding of the company’s internal processes and industry context ensures that the evaluation is aligned with the organization’s specific needs and goals.

External Advisors

Third-party experts, including:

  • Investment bankers
  • M&A consultants
  • Legal advisors
  • Accounting firms

can also conduct due diligence. These professionals have extensive experience in M&A transactions and can identify potential issues that internal teams might overlook.

Specialized Firms

Some companies specialize in providing due diligence services. These firms offer comprehensive analysis and reporting on various aspects of the target company, including:

  • Financial health
  • Operational efficiency
  • Market positioning
  • Potential risks

When to Conduct Due Diligence?

Due diligence should be conducted as early as possible in the M&A process. Ideally, it begins after initial interest and intent are expressed but before finalizing any agreements.

Tips for Conducting Due Diligence:

  • Use diligence management software to combine data storage with project management capabilities.
  • Start the process early in an organized manner.
  • Utilize checklists to efficiently manage the process.
  • Address potential risks throughout the process.
  • Hire experts, such as investment banks and consultants, to streamline the process.

The Importance of Due Diligence

A merger or acquisition is a significant corporate transaction that requires thorough due diligence. This process enables companies to make informed decisions, identify weaknesses and opportunities, and ensure a successful outcome.

However, conducting due diligence can be challenging, with common obstacles including:

  • Not knowing what questions to ask
  • Slowness of execution
  • Lack of communication
  • Lack of expertise
  • Cost challenges

M&A Science Diligence Management Certification

For those looking to improve their due diligence skills, M&A Science offers a comprehensive certification program that covers topics such as:

  • Diligence strategy
  • Team building
  • Data integrity

Easing the Due Diligence Process with DealRoom

Traditionally, due diligence involves using multiple tools, including virtual data rooms, Excel trackers, and email communications. However, this can lead to inefficiencies and miscommunication.

DealRoom offers a centralized platform that streamlines the process, reducing diligence time by 50% and eliminating version control worries.

Case Study: Liberty Insurance

According to Amy Weck, VP of M&A and Integrations at The Liberty Insurance, switching to DealRoom saved the company $200,000 per year in costs. By centralizing their due diligence process, they were able to eliminate the need for multiple disparate solutions and reduce time spent on the task.

In today’s fast-paced business landscape, conducting due diligence is a critical step in ensuring a successful M&A outcome. By understanding who can conduct due diligence, when it should be done, and best practices for the process, companies can make informed decisions and achieve their goals.