Due diligence refers to an investigation of the business to confirm all facts, or an authentication of the information provided before signing a contract. This includes reviewing all financial records, plus anything else deemed material.
Due diligence is the process of research and analysis that is performedbefore a potentialinvestment, acquisition, bank loan or business partnership, to enable the determination ofany major issues or potential issues in the subject of the due diligence. The prospective investor or acquirer must obtain all the required information to make sure that he makes a sensible investment rather than a costly mistake!
Investors carry out due diligence before buying a security from a company. Due diligence can be performed for mergers and acquisitions, researching hedge funds and startup investments.
Due Diligence helps you get a thorough understanding of what you are actually investing in or buying. The process helps answer the following questions for you: