Due diligence is a procedure of independent audit of a company. It usually precedes a merger and acquisition (M&A) transaction, a joint venture or a partnership.
Complex analysis allows reducing the risks that a potential investor assumes as a result of a transaction.
Types of the due diligence depending on the purpose:
- general due diligence is a comprehensive audit of the main aspects of the company, including financial position, taxation, legal issues, management, market share, etc.
- financial due diligence is a review of the company's financial position and results, including measurement of assets and liabilities (off-balance sheet liabilities, inventory impairment, etc.)
- tax due diligence - tax risks identification
- legal due diligence - analysis of legal aspects, i.e. registration of intellectual rights, court cases, etc.
- operational due diligence – verification of operating activities, production facilities utilization level, the possibility of changing the assortment, increasing production, etc.
- technological due diligence – audit of production technology and so on
The customer of the due diligence service is usually a potential investor or buyer. In case the customer is the company itself or its current owner, the due diligence is generally called vendor due diligence.
BDO in Ukraine provides general, financial, tax and vendor due diligence services.