Due diligence is an essential process prior to engaging in a business or other relationship.

Trigger: proposal of some transaction or interaction between 2 individuals or group



(1) an investigation into the details of the matter under discussion

(2) an audit of relevant records

(3) analysis of findings to determine whether or not to proceed


The extent of the investigation is what a reasonable person would be expected to do before entering into an agreement or contract.


Some factors that may be included in the evaluation:

(1) capitalization

(2) revenue, profit and margins

(3) the industry and competitors

(4) valuation multiples

(5) management and ownership

(6) balance sheet

(7) short and long term risks

(8) people within the company

(9) reputation

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