Due Diligence
An Investment Service
The term due diligence was originally applied by the Securities and Exchange Commission to an underwriter who is supposed to exercise “due diligence” in assuring the public that a deal is legitimate.
In the private equity community it has come to mean any research that is conducted to assure that a deal is legitimate. Historically, due diligence has been limited to a detailed examination of a company’s financials. However increases in deal flow, emerging technologies and globalization issues, as well as increases in both fraud and litigation, has led most institutional investors to investigate beyond the numbers.
In practical terms, better due diligence means better investments. By examining such issues as real life market and industry trends, the competitive outlook for a company, profiles of the management team and so on, the investor assures a solid foundation for future investment and growth. It doesn’t matter if a seed level investment achieves initial success, if information is later disclosed which prohibits future investment.
Most institutional investors have embraced the due diligence process and in most cases have made advanced due diligence practices a matter of policy. Unfortunately, most investors shortchange the process either because of a perceived lack of resources or because they don’t fully appreciate its importance.
At a high level, due diligence activities will generally include some or all the following :
- Structuring the Due Diligence Review
- Documents Collection
- Market Due Diligence
- Competitive Due Diligence
- Investigative Due Diligence
- Cultural Due Diligence.
At a detailed level, some examples of documents reviewed during a due diligence can include :
CAPITAL CONTRIBUTIONS BY PRINCIPALS/ CAPITALIZATION TO DATE
ORGANIZATION AND GOOD STANDING
CAPITALIZATION AND SHAREHOLDERS
SHAREHOLDER AGREEMENTS
CONCEPT PAPER, BUSINESS PLAN AND FINANCIAL STATEMENTS
TAX MATTERS
EMPLOYEES
INSURANCE
PATENT/TRADE MARKS/COPY RIGHTS/LICENSES
AGREEMENTS WITH CREDITORS
LITIGATION
PROPERTIES
AUTHORIZATIONS
CONTRACTS
CUSTOMERS
Due Diligence Services
Together with our associates, we will generally consider investing where the particular opportunity meets our criterion, and also where we can add value, to help the venture get to its next stage.
We provide the following services :
- Due Diligence Consultation
- Due Diligence Terms of Reference Preparation (Structure to be fit for the purpose)
- Due Diligence Project Planning and Required Document List Preparation
- Due Diligence Assessment (200 Point tailored depending on scope in TOR)
- Due Diligence Report and Recommendations.
Our Due Diligence service line fees are based on either time and materials, or a small equity stake in return for services.
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