Questions and Answers on Due Diligence

In the case of choosing a home or deciding on an employer or even deciding where we’ll go out for dinner next weekend due diligence is all around us. A thorough inspection of the home prior to making a purchase, a financial firm’s analysis of an investment opportunity, or a university’s review of applications are all instances of conducting the appropriate research needed for a high-risk transaction. This research helps to set baseline expectations and provide contingencies if things don’t go exactly the way we have planned them.

Due diligence questions usually include a review of financial data such as profit margins, and the cost of business items. Questions regarding intellectual property assets, like patents, copyrights and trademarks, are also common. Knowing who owns IP rights and the protection they provide helps identify legal risks for the buyer.

During the due diligence, buyers should examine the corporate structure of the seller including ownership details, competitor profiles, and most recent annual reports. They should also examine the background of any legal disputes and currently pending lawsuits which could have an impact on the deal’s final outcome.

One of the best ways to ensure due diligence is carried out properly and securely is to utilize an online virtual data room that allows for collaboration, review, and exchange of confidential documents. A VDR allows multiple parties to access and analyze documents simultaneously, eliminating duplicates and increasing the efficiency of the process. It also reduces the chance of losing valuable information or making mistakes in its interpretation.

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