The Due Diligence Boardroom

Due diligence is the act of vetting an entity before signing business agreements with vendors, a third party or customer. It’s also a foundational element of good governance, requiring individuals and groups to behave with the same level of care and concern as any reasonable person would under similar circumstances.

In the past, due diligence was conducted by a board of directors that brought in auditors to go through files of financial documents and other documents. There are still instances where this is required, however the vast majority of businesses conduct their due diligence using a virtual dataroom (VDR).

The main types of information required during due diligence are:

This includes all financial records, including tax records audits, financial evaluations, and audits by third party providers. This will include profit and loss, cash flow forecasts, balance sheets, and more.

Information about the products and service the company provides, including any R&D projects that are ongoing. This could include a list of any trademarks, patents and other intellectual property.

Buyers also want to know a company’s competitive edge that can include information like their customer base sales pipelines, sales pipelines, market reach, and more. This can be accomplished by analyzing the company’s existing data on these elements and conducting interviews with current customers.

As a seller, you have to be willing to disclose the information that a prospective buyer might want. However, it’s not a matter of just offering everything up, since it is important to safeguard your intellectual property. It is essential to limit access to ensure that only your most trustworthy partners have access to your most sensitive information.

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