Corporate Laws

Concept of Due diligence: Meaning, Definition, Levels, Process, advantages and disadvantages

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In this article we will discuss about Concept of Due diligence: Meaning, Definition, Levels, Process,  advantages and disadvantages.

Meaning

Concept of Due diligence: Meaning, Definition, Levels, Process,  advantages and disadvantages.

Due-Diligence refers to a process in which all the books are verified before the contract between two parties. In this contract both the parties are agreed after the examination of accounts, facts and it happens before the legal sign by the both parties.

Generally the term Due-Diligence is used in reference to business transactions (mostly mergers and acquisitions, joint venture, project finance, securitization, etc.).

 

Definitions

Due diligence is the careful, thorough evaluation of a potential investment, whether on a corporate or individual level.

Due diligence is the process of systematically researching and verifying the accuracy of a statement.

The main aim of due diligence process is to identify business problems and it is mainly beneficial to seller buyer and shareholders.

Levels

  Levels of Due Diligence
Strategic and Operational

 

     Legal and Regular

 

          Finance

 

Process of Due Diligence

Concept of Due diligence: Meaning, Definition, Levels, Process,  advantages and disadvantages.

  1. Financial: – The buyer will be concerned with all of the target company’s historical financial statements and related financial metrics, as well as the reasonableness of the target’s projections of its future performance.
  2. Business:To analysis of business before the contract between two parties whether to check the position of the business in market and to analysis of their competitors in market.
  3. Accounting: – Verification of accounts of the business to start up of contract between both parties and analysis of their financial position.
  4. Environmental: – To check the environment of the business and their market position.

Advantages 

  1. verification of accounts
  2. Verification of information
  3. To know the market position
  4. To know the financial position
  5. To provide opportunity to seller
  6. Increase number of shareholders
  7. True and fair position of the business

Disadvantages

  1. Lack of accuracy
  2. Time consuming process
  3. Undisclosed information

So we will discuss about Concept of Due diligence: Meaning, Definition, Levels, Process,  advantages and disadvantages. For any query comment below.

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