Startup Dictionary
Due Diligence
Definition
A comprehensive appraisal of a business undertaken by a prospective buyer or investor.
Deep Dive
Due diligence is a comprehensive appraisal of a business undertaken by a prospective buyer, investor, or lender to assess its assets, liabilities, commercial potential, and other factors relevant to a transaction. This meticulous process aims to uncover any potential risks, liabilities, or discrepancies before committing to an investment or acquisition. It typically involves a detailed review of financial records, legal documents, operational procedures, intellectual property, market position, and management team capabilities.
Examples & Use Cases
- 1A private equity firm scrutinizing a target company's financial statements, customer contracts, and pending litigation before an acquisition
- 2A venture capitalist analyzing a startup's technology patents, team background, and market opportunity before making an investment.
Related Terms
Risk AssessmentFinancial AuditLegal Review