Due Diligence Report is basically an internal memo shared with the executive team members who are involved in monitoring and are responsible for closing the deal. Let’s understand more about it.
Due diligence is a simplistic process that includes research and analysis before an acquisition, or investment. Also, it is done before a business partnership or bank loan, to understand and find out the value of the subject undertaken for due diligence. Further it is relevant to ensure that there are no issues involved, which can be a blocker in the process.
There are three types of due diligence report that are prepared in order to find out the respective desired details, before moving ahead with the transaction:
1. Business Due Diligence
This type of Due Diligence is about the detailed assessment of the parties involved in the transaction, various business aspects and the investment qualities are involved.
2. Legal Due Diligence
As the name suggests it emphasises on the legal segments of the transaction, any legal pitfalls, shortcomings and other legal issues. The transactions under scrutiny of this type of report encompass both inter-corporate and intra-corporate transactions. Along with that, there are multiple regulatory checklists that are involved to complete this type of diligence that includes existing documentation.
3. Financial Due Diligence
In this type of due diligence, all the financial, operational and market estimations are considered. With the inclusion of this type, the process of acquiring a company becomes easier. Assessment and in-depth study of accounting policies, audit practices, and tax compliances of the company are analysed in this category of due diligence.
The due diligence report determines various aspects of a company that helps in going forward with any traction lined up for further growth of both the parties involved. Hence, to ensure all the elements and factors involved are well in place is what a due diligence report validates.
Here are a few notable benefits of having a due diligence report before any transaction:
Elements that constitute a competent due diligence report are listed as below:
From the above points, the effects and relevance of a due diligence report are evident and how the companies must follow the process is another compliance, which is executed by various due diligence report service providers in India. To make the transactions workable, the companies must incorporate the above listed proceeding, otherwise to close the project deal successfully can be a challenging task for both the parties involved.