What is a due diligence and what should it cover?

//What is a due diligence and what should it cover?

Let’s say that you have confidence in your own business – it is profitable, your contracts are iron-clad, and there are no major risks hiding behind your financial statements. But what do you need to do before you can say the same about the business that you want to buy or invest in? How can you be sure that you’re getting involved with a business that is worth your time and money? You may want to perform a due diligence. But what exactly does this process cover? Are they all the same? And when do you need specialised help?

What is a due diligence process?

A due diligence process is an audit that you can (and often should) perform on a business or company to find out the fundamental facts about the entity, give it a realistic value, and identify any problems or risks that may arise in the future. It is most often used by potential purchasers or investors to uncover the relevant information about a business or company that they want to buy or invest in. This process usually involves reviewing the key contracts, financial statements or policies of the target company, but could have a much wider or narrower scope, depending on its focus area. This information will tell the purchaser or investor what the potential risks the target company is facing, and help them make an informed decision.

When do I need one?

There may be times where you are legally required to perform a due diligence. More often than not, however, it is simply a good idea to perform a due diligence – you don’t necessarily need to do it, but it would be in your (or your company’s) best interests for you to do so. This includes where you are considering buying or merging with a company.

Types of due diligence

A due diligence can take a variety of forms, each of which will focus on different things, depending on what you are most concerned about. A due diligence can be as in-depth as you want it to be. Some of the most common due diligence processes include:


A financial due diligence aims to provide an in-depth understanding of the target company’s financial situation. This typically involves going through the company’s financial records, customer accounts and any other relevant financial documents that will assess the financial risk to the company. These are typically done by accountants or people with intricate knowledge about company finances.


An asset due diligence typically looks at a detailed list of all the target companies fixed assets and determine what risk a purchaser will carry should they purchase the target company. The types of assets that are included in this kind of due diligence typically include leased equipment, real estate deeds and properties with mortgaged bonds registered over them. However, the scope can be much broader.

Human resources (HR)

An HR due diligence looks at the labour risks of the target company. This consists of looking at the number of the employees employed by the target company, the employment contracts, any on-going labour disputes that the target company is involved in, and the financial implications of these disputes.


A legal due diligence highlights the potential risks that the target company faces from a contractual perspective. This process requires a thorough investigation into the target company’s key customer contracts, as well as their loan agreements, company secretarial documents and any other contracts or documents that the acquiring company will ask to see.

How can we help you?

We perform legal due diligence services, with a focus on IT. We have experience in helping IT companies, and companies wanting to acquire IT companies. We look at and highlight any issues relating to the target company’s:

  • customer contracts,
  • loan agreements,
  • company secretarial documents,
  • IP owned by the company,
  • IP licensed by the company from other parties, and
  • privacy policy and other data protection documents.


If you are interested, please complete the form on the right or enquire now. We will contact you to find out more about your requirements and give you a quote.

By |2019-12-13T15:32:23+02:00December 13th, 2019|Categories: Uncategorised|