The exhaustive process of analyzing the prospects and financial position of a potential investment. [go back to glossary list
A process of investigation of a company by a prospective investor.
The checks that are carried out before a major transaction: by bidders before a takeover offer, by underwriters before an IPO.... more on: Due diligence
Refers to the entire process of researching and verifying the soundness of a potential issuer or investment.
The overall process of evaluating a business opportunity including examination of financial records.
Investigation that is performed prior to underwriting a loan or an investment (acquisition) that considers all aspects that may affect the financial performance of that investment. Many times due diligence is performed by a buying firm before it purchases a firm being sold to gain an understanding of the true value of the assets of that firm.
The process by which a party to a new issue (typically an underwriter, usually assisted by counsel) investigates an issuer or other party obligated to make payments with respect to a bond issue or the enterprise or revenue stream providing security for such issue. Such inquiry is customarily made by an underwriter to promote the accuracy and completeness of the official statement and to provide the underwriter with a reasonable basis for belief in the accuracy and completeness of the document. Further inquiry may be required if the investigation reveals facts that are incomplete or inconsistent, either on their face or in light of other known facts. See: DUE DILIGENCE OPINION; FULL DISCLOSURE.
The process of investigating a company before investing in it. It typically includes calling references, calling customers, investigating competitors, validating legal contracts, visiting remote locations, coordinating with other investors, interviewing the entire management team, testing the technology, building spreadsheets and running sensitivity analyses on the projections to see if they make sense, etc.
In an offering of securities, certain parties who are responsible for the accuracy of the offering document, have an obligation to perform a "due diligence" examination of the issuer; issuer's counsel, underwriter of the security, brokerage firm handling the sale of the security. Due diligence refers to the degree of prudence that might properly be expected from a reasonable man, on the basis of the significant facts which relate to a specific case.
The investigation and evaluation of a management team's characteristics, investment philosophy, and terms and conditions prior to committing capital to a fund. The term also refers to the process whereby a fund manager inspects a company, its management, product, accounting etc. prior to making an investment.
An investigatory process and verification exercise undertaken by professional advisors on behalf of the purchaser of a business designed to provide comfort on the soundness of the purchase, and reveal any serious legal or financial problems with the target company. Legal due diligence will concentrate on aspects of the business such as its trading and employment contracts, property title deeds and corporate form and structure, whilst financial due diligence examines the accountancy and tax aspects of the business, including accountancy policy, verification of the accounts, payroll and tax history.
Level of prudence to be expected from a reasonable person under specific circumstances.
The process of researching a business and its management prior to deciding whether to proceed with an investment in a company (see paragraph 26, Section IV above).
A process undertaken by potential investors -- individuals or institutions -- to analyze and assess the desirability, value, and potential of an investment opportunity.
The detailed analysis and appraisal of a business which takes place after a deal has been agreed in principle. During due diligence nasty things may creep out of the woodwork - flaws appear in a property lease, references on individuals don't say what they were expected to say, assumptions on which profit forecasts were based don't make sense.
An internal analysis by a lender, such as a bank, of existing debts owed by a borrower in order to identify or re-evaluate the risk. An independent analysis of the current financial state and future prospects of a company in anticipation of a major investment of venture capital or a stock-exchange flotation. A Venture Capitalist firm's examination by its lawyers and auditors of the records, accounts and any legal documents of an existing business.
Process of investigating and gathering information necessary to make an informed and intelligent decision about a matter, such as a prospective buyer examining the authenticity, condition, quality, and status of property to be sold.
Investigation carried out to establish an accurate picture of a company's finances and market position.
the investigatory process performed by investors to assess the viability of a potential investment and the accuracy of the information provided by the target company.
the fair, proper and due degree of care and activity. It is a term that is expressed or implied in contracts, usually stating that good faith efforts are to be made to perform obligations. Prudent buyers conduct due diligence investigations to be sure contact obligations requiring good faith efforts have truly been acted upon. definition of due diligence defined definition of due-diligence defined
All the research involved in learning more about a possible investment.
An investigation into a company’s background and financial reliability – for example, when it is about to issue new securities, or when it is about to be taken over. Analysts in ABN AMRO’s M&A pool will be particularly involved in conducting due diligence on companies, through in-depth analysis and intelligence of the company’s records.
The use of extensive and documented procedures for collection of student loans, along with full and timely disclosure to borrowers of their rights and responsibilities. Minimum due diligence activities for collection of student loan debt is mandated by the federal government.
Potential grant recipient organizations may lose their tax-exempt status, for any number of reasons. Awarding grants, even inadvertantly, to these organizations can provoke an IRS investigations into the foundation's activities - a headache, to be sure. Due diligence requires insuring that all grant applicants have current tax-exempt status. IRS Publication 78, the Cumulative List of Organizations, is an excellent resource for verifying tax status.
The investigation of company information including any disclosure documents including private placement memorandum, registration statement, or proposed prospectus by attorneys, investment bankers, and accountants to ensure that no material facts are omitted, and the information is accurate. Also, a general term relating to any investigation by venture capital firms and other investors of the company, its business and financial plans prior to proceeding with an investment.
Investigation and research carried out in order to evaluate an investment proposition and determine whether to commit funds. This process includes reviewing: management team, market, competition, track record, finances, etc.
A reasonable investigation conducted by the parties involved in preparing a disclosure document to form a basis for believing that the statements contained therein are true and that no material facts are omitted.
Definition - The process of investigating an investment. By performing due diligence, the investor has performed research and analysis to provide higher confidence that the investment has the potential to provide solid returns. At AmeriCap - Our process was created to perform due diligence on all of the potential investments that might be added to our final portfolio. We investigate companies by looking at their growth characteristics and their likelihood of sustaining that growth in order to determine if there is validity to the investment merits of a holding.
The process of analysis, investigation and substantiation in relation to capital raising programs, asset acquisitions, the making of recomendations by a securities firm and general business dealings such as entering into contractual obligations.
The legal definition: a measure of prudence, activity or assiduity, as is properly to be expected from, and ordinarily exercised by, a reasonable and prudent person under the particular circumstances. ngineering Report: Report generated by an architect or engineer describing the current physical condition of the property and its major building systems, i.e., HVAC, parking lot, roof, etc. The report also determines an amount for calculating replacement reserves, if needed.
An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to a specific investment such as investment style, risk management, the manager's background, track record, operational and legal set up etc.
The process of assessing the business and financial viability of a potential investment target, as well as the potential terms and conditions of an investment agreement.
One of the responsibilities of a grantmaking organization; due diligence is the process of confirming that a grant application is bona fide, and that the applicant is eligible and fiscally sound
Detailed examination of the books and records of an issuer, an assessment of a potential investment and part of the evaluation for an investment decision.
1. making a reasonable effort to perform under contract. Example: A prospective homebuyer signed a sales contract contingent on the sale of her present residence. She is expected to use due diligence in marketing her present house. 2. making a reasonable effort to provide accurate, complete information. A study that often precedes the purchase of property, which considers the physical, financial, legal and social characteristics of the property and the expected investment performance; the underwriting of a loan or investment. Example: The pension fund sent various experts to perform a due diligence study of a property it was considering for purchase. Matters to be considered included the mechanical and electrical systems of the building, local market conditions and competition for the property, and environmental hazards. 3. examination of property to detect the presence of contamination. Example: Before lending on a shopping center, the lender insisted on an environmental audit as part of its due diligence.
Such a measure of prudence, activity, or assiduity, as is properly to be expected from a reasonable and prudent man under the particular circumstance.
This term describes the process of the investment bankers and lawyers for the underwriters conducting an in-depth examination of the proposed IPO including the company's prospects, strategy, and financial statements. All relevant and material information of the company's prospects must be disclosed in the prospectus.
"Environmental Due Diligence" is a term that describes the responsibilities of a landowner, such as GSA, to conduct an appropriate inquiry prior to the purchase or development of a parcel of commercial real estate and ensure that all "recognized conditions" have been identified.
Due diligence is often performed on the acquirer as well as the target
Due diligence is the measure of prudence, activity or assiduity that is properly to be expected from, and ordinarily exercised by, a reasonable and prudent person under the particular circumstances. ( 53)
Investigation conducted by Underwriters and their counsel and, in some cases also by bond counsel and Issuer's counsel to determine whether all material items in connection with the Issuer, the Issue and the security for the Issue have been accurately disclosed in the Official Statement (or if a Private Placement in the Placement Memorandum) and that no material disclosure has been omitted.
In-depth analysis and assessment of the commercial, financial, legal and technical fundamentals of a business targeted for investment.
Describes the process undertaken by a venture capitalist to investigate and review all aspects of a potential investee company. Due diligence review includes analysis of the investee company's prior activities, its management and whether the company has complied with its duties under applicable law.
The degree of prudence that might be properly expected from any reasonable person in the circumstances; applicable to foundation personnel who act in a fiduciary capacity. (See Fiduciary Duty)
An investigation of the legal, financial and physical nature and characteristics, including the entitlements and liabilities attaching to and arising from a real estate asset or assets, usually for acquisition or compliance purposes.
Due diligence is the level of judgment, care, prudence, determination, and activity that a person would reasonably be expected to do under particular circumstances.
An investigation of a company that is preparing to go public. | back to educate yourself
The thorough investigation of a potential acquisition candidate, real estate investment, etc. Often used to refer to the investigation of a company for an initial public offering.
In the process of an acquisition, the acquiring firm is often allowed to see the target firm's internal books. The acquiring firm does an internal audit. Offers are often made contingent upon the resolution of the due diligence process.
The responsibility of entities or individuals involved in a securities offering to investigate the information in the offering memorandum or prospectus to provide a reasonable basis for believing that the information contained is true and that the offering documents do not omit to state a material fact. Acquisitions are often contingent upon the satisfactory completion of the due diligence process. G-H I-K Q-R T-U V-Z
Investigation of a prospective investment by an investor or interested party prior to the consummation of the transaction.
Exhaustive research on a property, transaction, income stream, Trustor and/or payor. Due diligence may involve appraisals, title searches, lien and property tax searches, property and neighborhood inspections, broker and contractor opinions.
Ensuring that, prior to recommending an investment to a client, sufficient analysis has been undertaken.
A thorough investigation into the claimed performance of a business, led by the potential buyer. It involves a verification of all claims made by the business owner.
(1) Procedures performed by underwriters in connection with the issuance of a SECURITIES EXCHANGE COMMISSION (SEC) registration statement. These procedures involve questions concerning the company and its business, products, competitive position, recent financial and other developments and prospects. Also performed by others in connection with acquisitions and other transactions. (2) Requirement found in ethical codes that the person governed by the ethical rules exercise professional care in conducting his or her activities.
Background check and research conducted by the factor to assess validity of a prospective factoring client and that client's customers.
Investigation process that limits a buyer's liability for nondisclosure of information that is not uncovered during the investigation.
This is one of the main processes which takes place before a transaction (e.g. MBO/MBI) is completed. The aim is to ensure that there is nothing which contradicts the financier's understanding of the current state and potential of the business. The individual elements of due diligence may include commercial due diligence (markets, product and customers), a market report (marketing study), an accountants report (trading record, net asset and taxation position) and legal due diligence (implications of litigation, tittle to assets and intellectual property issues).
The process whereby a person investigates an opportunity, assesses the quality of the management team, and the key risks associated with an opportunity.
A critical component of mergers and acquisitions, it is the process by investigation and evaluation is conducted to examine the details of a particular investment or purchase by obtaining sufficient and accurate information or documents which may influence the outcome of the transaction.
Exercising reasonable care and diligence in the making, servicing, and collection of a student loan to retain the insurance of the loan.
Exhaustive research on a transaction, income stream, client, and/or payor. Due diligence may involve credit checks, appraisals, UCC searches, lien searches, or on-site visits with clients.
As part of the process of taking a company public, the investment bankers and lawyers for the underwriters conduct an in-depth examination of the proposed IPO. They speak with management about the company's prospects, strategy, competitors and financial statements. Information that is material to the company's prospects must be disclosed in the prospectus.
The thorough investigation and analysis the investor makes of a prospective investment to see if it meets the investor’s strategy and criteria for funding. It includes an assessment of the industry, market, business concept, management team, the company’s technology, products and markets, and financial model.
The degree of care and caution required before making a decision; loosely, a financial and technical investigation to determine whether an investment is sound.
(1) A type of facilities survey taken before a major acquisition is initiated. Such surveys may include investigation of building condition, environmental hazards, regulatory compliance, financial value, and other factors. (2) The activities performed in advance of a transaction in order to uncover environmental risks and to assess potential environmental liability.
Vehicle Mileage Check Ltd (VMC) are the leading provider of due diligence checks to the trade in the UK, and the mileage they have collected for over 10 years has been added to Experian Car Data Check. VMC Ltd´s contact details are as follows: VMC Ltd PO Box 16 Marple Stockport SK6 7HD Telephone - 01663 766068 or 01663 766047 Fax - 01663 766049 Email -
[email protected] Visit their website at www.vmc-ltd.com
An investigation process, required for merger agreements and reinsurance arrangements, which includes evaluating whether the investigated company (1) has adequate reserves and (2) uses sound pricing techniques.
the process by research is conducted to determine the value of an investment, licensing agreement, merger, or other similar activity.
In CMBS due diligence is the foundation of the process because of the reliance securities investors must place on the specific expertise of the professionals involved in the transaction.
Process of validating a potential investment. Usually involves the study of six areas of a company's business plan: market structure, competition and strategy; technology assessment; management team; operating plan; financial review; and legal review. Checking the references of the principals is a critical portion of this process. Go to top of page
Rigorous investigation and evaluation of an investment opportunity before committing funds. Includes review of the management team's characteristics, business stage and operations, financial projections, current contracts and agreements, relative to the investment philosophy and investment terms and conditions established by the investor, prior to committing capital to the fund.
A phrase referring to careful consideration of a new issue. Underwriters will conduct meeting to asure that all pertinent information has been considered before issuance.
the formal process of investigating the background of a business being bought or of another party in a major long-term contract. Used to ensure that there are no hidden details that could effect the deal.
The responsibility of underwriters and others, who prepare or sign the registration statement, to conduct a reasonable investigation to provide a basis for their belief that the registration statement does not contain misstatements or omissions of material facts at its effective date.
The practice of investigating a potential investment.
Due diligence, in terms of environmental responsibilities, means taking reasonable care to minimise environmental harm. A lack of due diligence leading to such harm may result in charges of negligence under the Environmental Offences and Penalties Act 1989. E. coli (Escherichia coli) Faecal bacteria found in the digestive tract of animals, which are used to indicate presence of wastewater contamination within an environment.
the process of investigating a business venture to determine its risk and feasibility.
The detailed investigations that an investor will make before buying a share in your business. Equities The ordinary shares of publicly-quoted companies.
This is when an underwriter makes a reasonable investigation of a company, to see if they are ready to go public. The underwriter will delve deeply into the financial statements of the company. This can take several months.
Generally refers to the investigations conducted by or on behalf of an acquiring company on a target company prior to the acquisition being completed. It is regarded as the inquiries that a diligent director would make on a target company before completing the acquisition.
The reasonable investigation performed by the acquirer prior to purchasing a business.
A systematic examination in some detail (sometimes highly thorough detail) of all material and relevant information particularly made in pursuit of adverse information. The intention is to allow for a fully informed investment decision (e.g. further research done (more in-depth) after one lessor has initially decided to acquire another but before the acquisition is finalized or closed).
in-depth examination of a proposed initial public offering by the underwriter's lawyers and investment bankers as part of the process of taking the company public; material information related to the company's prospects must be disclosed in the prospectus for the IPO; research conducted that supports a recommendation for a security
Appropriate care investigating the business condition of an acquisition target. It can be difficult for an outsider to learn enough about an operation to make an informed decision, but it is critically important.
The "reasonable investigation" made by a "prudent man" to determine whether or not there were material misstatements or omissions, such as in a securities registration statement.
Process undertaken by venture capitalists, investment bankers or others to thoroughly investigate a company before financing it; required by law before securities are offered for sale.
Process of investigating all risks associated with an organization or grantee.
Detailed investigation into a company's history and current financial position.
The effort necessary to bring an intent to appropriate into fruition. Due diligence does not require unusual effort or expenditures, but only such constancy in the pursuit of the undertaking as is usual with those in like enterprises. Actions which demonstrate a good faith intention to complete the undertaking within a reasonable time.
The process by which a purchaser of or an investor in a company or business investigates the records of the target to support its value and find out whether there are "skeletons in the cupboard". Professional reports from accountants and solicitors may be included. The process is covered by confidentiality undertakings and supported by warranties.
The process of investigation into the details of a potential deal or investment, e.g. an examination of operations, management, and verification of material facts.
An investigation or audit by the investor of a potential investment. Due diligence examines all material facts in regards to a sale.
Due diligence is the requirement that organizations must develop and deploy a protection plan to prevent fraud, abuse, and additional deploy a means to detect them if they occur.
The process a broker or other representative implements in order to investigate and analyse an investment sufficiently before making any recommendations.
Due diligence is a term that refers to the efforts of an underwriter to thoroughly investigate the background and financial status of an issuer. The objective of this endeavor is to ensure that all material information has been considered before the issuance of securities and that all necessary information is appropriately disclosed in the prospectus. The chief purpose of due diligence investigations is to make certain that investors are fully informed of the risks associated with a particular investment.
Activities carried out by a prospective purchaser or mortgager of real property to confirm that the property is as represented by the seller and is not subject to environmental or other problems. In the case of an IPO registration statement, due diligence is a reasonable investigation by the parties involved to confirm that all the statements within the document are true and that no material facts are omitted.
A thorough investigation of a company that is preparing to go public, undertaken by the company's underwriter and accounting firm.
During a listing, an agent promises to use "due diligence" in searching for a buyer or in advertising the property.
A term used to describe the investigation necessary to ensure that material information pertinent to an issue has been disclosed.
Due diligence is a term used for a number of concepts involving either the performance of an investigation of a business or person, or the performance of an act with a certain standard of care. It can be a legal obligation, but the term will more commonly apply to voluntary investigations.
