Due diligence is the level of judgment, care, prudence, determination, and activity that a person would reasonably be expected to undertake to confirm all material facts before entering in an agreement or transaction with another party.

The term is typically used with reference to investors and buyers. But sellers also could perform a due diligence analysis on the buyer with regard to the buyer's ability to purchase and other issues. In any case, the diligent party acts to control risks.

Unfortunately, due diligence is more often than not done mainly from a financial perspective in order to assess the target company's market value. The financial aspect includes among other things balance sheet issues, banking relationships, exposure due to possible litigation (e.g., asbestos-related liabilities), and intellectual property issues. Typical due diligence might also look at organizational matters and would include among other things a management organizational chart and simple biographies of executive management and key employees.

Due diligence must go much deeper in order to really control risks--that is, it must validate or refute the investment rationale.

Deep due diligence will, therefore, also thoroughly assess key managers and employees (both current and potential) and probe relevant business relationships of the target company and of its key employees, as well as look carefully into technological, marketing and other operational factors. Critical factors in the business environment and their potential impact will be examined, as well. This effort will not only control risks--it may even uncover hidden opportunities.

SRS Intelligence will use a variety of techniques and mobilize and coordinate multiple resources, even in different parts of the world, to give you the knowledge you need to confidently undertake mergers, acquisitions, or other critical business transactions and achieve your strategic or tactical goals.

For a better understanding of due diligence and how SRS Intelligence can give you a crucial knowledge advantage, look at this actual case from our files:

• Case 9: Due diligence