know Your Customer Due Diligence Checklist

Due diligence, is often known by the acronym ‘DD’. The entire process is an investigation in to the affairs of a company prior to its investment, acquisition, disposal, refinancing, restructure, public listing or other similar transaction.

Once a decision has been taken to proceed with an initial agreement of cooperation with the target (after the signing of a confidentiality agreement, and after a letter of intent has been issued), the investing party is permitted through mutual agreement to conduct an investigation into the operational situation of the target.

Due diligence ordinarily incorporates investigative measures directed against all relevant matters pertaining to an investment. The aim of due diligence is to enhance the understanding of key information underpinning a corporate transaction, allowing all parties to make informed investment decisions.

There isent a hard or fast rule of what the due diligence process involves, and each engagement will be individual to the specific transaction. Due diligence is a bridge that must be crossed in nearly all transactions. Without it, the risk of problems or failure along the journey are undoubtedly increased.

  • Financial due diligence:
    A review of historic and current data (trading results, balance sheet and cash flows) for the entire entity or possibly on specific projects, a review of forecast performance and potential funding requirements. Assessment of the impact, if any, on the value of the target business, and any tax issues arising
  • Commercial due diligence:
    Could encompass a review of various commercial factors including but not limited to; market conditions, sector specific legislation, competitor analysis, product or service assessment or any other commercial aspects that an investor wishes to investigate.
  • Operational due diligence:
    Consideration of non-financial matters of a target business, which may include assessment of systems and processes, review of the incumbent management team, stating levels and other HR activities, or insurance arrangements and risk assessment.
  • Legal due diligence:
    Investigation of any legal risk associated with the rights and obligations of the target entity. Issues may typically involve property ownership, intellectual property and employment issues

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