The acquisition of a company via a merger or sale could be a major milestone for any business. However, it could create the possibility of serious issues. Legal liabilities, financial losses and reputational damage are all http://www.getvdrtips.net/angel-investor-due-diligence-checklist possibilities. Due diligence is a process that allows businesses to thoroughly evaluate any new business.
The risk factors discovered during due diligence are largely dependent on the type of business and nature of the customer. For instance banks or financial institution might require a different amount of due diligence than a retail store or e-commerce company. A company with a global presence may need to review country-specific laws that affect its operations more than a domestic customer.
Companies should be aware of the possibility that customers could be listed on sanctions lists. This is an essential test that must be conducted prior to any contract is signed, particularly when the customer might be found to be involved in illegal acts such as bribery or fraud.
Other factors to be considered during a due diligence exercise include the reliance on any specific individuals or entities. The dependence of a business on its owners or key employees could be a red light which could result in unexpected losses if the employee is suddenly dismissed from the company. Another consideration is the level of share ownership owned by the senior management. A high percentage of ownership is a good indication, whereas low levels are a red flag signal.