Due diligence is a process which buyers use to comprehend a seller’s transactions, such as mergers or acquisitions. This review is conducted through an array of questions and documents that the buyer requires from the seller. While an extensive M&A due diligence process can help potential buyers verify important facts about the target company, there are challenges to conducting this check.

Due diligence can be expensive and time-consuming. Based on the complexity of the transaction, it could take weeks or even months. Due diligence can also involve an extensive group of specialists from third parties, ranging from CPA firms that conduct due diligence on financial transactions, to industry consultants who analyze the business model and future opportunities, environmental lawyers and labor lawyers. The experts will spend a lot of their time at the main headquarters going through the data and information that they have prepared.

For sellers it is crucial to prepare for due diligence and understand its subtleties. Think about your negotiation strategy and prepare the appropriate materials to study. It’s also important to keep an your emotions out of the negotiation process in order to negotiate objectively.

Brett Dearing, an M&A expert, shares his knowledge on the importance of due diligence during the M&A procedure. Dearing provides an explanation in this fourth installment of PitchBook’s Mergers and Acquisitions 101 Series how M&A Due Diligence can reveal risk, confirm the value and make sure that the investment requirements of the target company are fulfilled.

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