Mergers and acquisitions can make organisations greater than the sum of their parts. However, they can also put companies at risk if they are exposed to undetected vulnerabilities. Corporate due diligence checks involve the thorough scrutiny of a business to expose potential liabilities to investors.
As every business is different, there is no one-size-fits-all approach to these investigations. That’s why it can be prudent to hire specialists in due diligence to ensure nothing vital is overlooked that could place the business or its clients at risk.
Why is due diligence important?
Legal due diligence investigations should be completed any time a business or its assets are sold or acquired. A successful business may be plagued by a range of problems or weaknesses that are not obvious from the outside and which require a trained and dedicated investigator to identify.
These could be unresolved legal problems, financial issues, security vulnerabilities or other industry-specific liabilities. Like a bad apple, a bad acquisition will affect the parent company that becomes exposed to the same problems.
As well as ensuring brand protection and security, due diligence can also be useful in valuing an acquisition.
Due diligence checklist
A tailored approach is necessary whether due diligence checks are for your firm or on behalf of a client. The difference between good and bad due diligence is that the latter treats every case the same and may not identify problems until after the deal has been signed.
Here are some tips for corporate due diligence checks.
1. Take your time
Time is money but rushing the process could cost more if you don’t identify potential risks. Due diligence investigations generally take between two and six months, depending on their complexity.
2. Look to the long term
Mergers and acquisitions aren’t just about the immediate benefits. You also need to consider how an investment in another business will continue to yield returns in the future, whether that is saving money, allowing access to assets or intellectual property, opening up new geographic regions or other benefits.
3. Focus on more than just assets
Due diligence doesn’t end at finances, investments and debts. With cybercrime being a fast growing threat, investigations are required to analyse a business’ data security and background checks on executives and employees to make sure your own data will not be at risk.
4. Avoid bias
Don’t let enthusiasm for a deal blind you to possible flaws. If you are too close to be objective, rather than using in-house lawyers hire an outside agency to complete your due diligence checks.
Talk to the experts
IFW Global specialise in assisting large law firms conduct due diligence checks to safeguard their own firms and their clients. To find out how our highly competent local and global professional investigators can assist, click below to download our free ebook, Law Firms and Investigations: How IFW Global Can Help You Win Cases.
IFW Global has a strong operations centre in the heart of Asia, which is the world’s largest hub for many types of cybercrime. We also have offices elsewhere around the globe in Europe, USA and Oceania.