Due diligence is a procedure for evaluating and investigating new business opportunities. In today's markets, the term is used principally to denote the detailed business assessment that one firm carries out before acquiring another. No company wants to wake up the day after the purchase to find that its newly acquired subsidiary has an undisclosed liability or weakness.
For example, one pharmaceutical company preparing to buy another needs to conduct thorough due diligence to make sure that they are getting what they expect. Do the products have an adequate margin of safety? Is there risk of a plant shutdown? Have there been environmental spills? Are the pensions adequately funded?
Acquiring companies study these questions themselves, or hire expert consultants to help them. These kinds of investigations help ensure that businesses make informed decisions when they pursue a new opportunity.
About the Author: Horace Nalle is a Chief Legal Officer at Merial, the maker of Frontline and Heartgard pet medications. He has extensive experience with due diligence.
For example, one pharmaceutical company preparing to buy another needs to conduct thorough due diligence to make sure that they are getting what they expect. Do the products have an adequate margin of safety? Is there risk of a plant shutdown? Have there been environmental spills? Are the pensions adequately funded?
Acquiring companies study these questions themselves, or hire expert consultants to help them. These kinds of investigations help ensure that businesses make informed decisions when they pursue a new opportunity.
About the Author: Horace Nalle is a Chief Legal Officer at Merial, the maker of Frontline and Heartgard pet medications. He has extensive experience with due diligence.