When facing a change of ownership in a company, a due diligence is typically carried out, which means and involves a process where the buyer conducts a thorough and detailed investigation of the conditions in the company.
But how does this work in practice, and what does due diligence mean in simple terms? We will delve into this further below.
Due diligence means, in short, a thorough investigation. This process involves a careful review of various elements related to drawing up or designing a contract regarding a change of ownership of a company.
It is necessary in this context to closely examine the assets that the company has and generally their financial status. Therefore, the following elements are often investigated:
However, the investigation varies depending on the purpose of the change of ownership and the specific industry. Which information is crucial can vary depending on the purpose of the investigation. It can be advantageous to use professional tools such as relevant platforms for this due diligence process.
How this process works in practice can vary, but what is often done in practice is to divide the company's assets and areas into groups and phases, and then each area and phase is investigated step-by-step.
First and foremost, a preliminary investigation of the company can provide insight into whether there are any parameters that generally prevent the agreement and the change of ownership from being completed. This preliminary investigation can, therefore, also put a natural hold on the upcoming investigation, due diligence if some areas are inadequate.
The next step in a due diligence process is to collect data on the company. This data can cover the aforementioned areas, which are analyzed and interpreted thoroughly and with care.
Finally, a report is prepared that outlines areas where there may be issues. This is done with a view to the further negotiation of the contract or potential termination of the negotiation.
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In addition to knowledge about due diligence, you can read much more on our site about areas such as money laundering and AML, as well as PEP lists and data security. We help companies with a compliance check to investigate where you can optimize and need updates.
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