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3 elements of complete due diligence

On Behalf of | Jan 4, 2023 | Business Law |

Businesses looking to grow and expand often start the search for an ideal company to acquire. Once an ideal candidate pops up, due diligence plays a key role in a successful and beneficial acquisition.

While the financials, legal aspects and intellectual properties may top the list of ensuring complete due diligence, the following three also play a vital role.

1. The reason for selling

According to Statista research, more than 11,000 mergers and acquisitions happened in 2020. Each one happened for its own unique reason. Along with researching how the company runs, also research the reason for selling. If the company has tried to sell before unsuccessfully or recently merged, it may indicate hidden issues that may make the opportunity to buy less appealing.

2. The management team

Complete background checks on the key people in the company, including shareholders and investors. If the acquisition happens, having the right people on the teams better ensures success. Along with the people, a background check on the company should happen to ensure it has no judgments, existing court actions or a poor record regarding debt repayments.

3. The company culture

Company culture has a complex definition. Simply talking with employees and taking in how things look may help fill in the picture. A key element of the culture encompasses how things get done. How does the management team make decisions? How easily does the company incorporate new ideas? Asking these questions provides insight into how much change will need to happen and whether it will go smoothly.

Investing in another company should never happen before having all information available, from the big numbers to the small elements that define the business.