There is no business in the world that doesn’t come with risks. Risk is an inherent characteristic that is embedded in the very nature of the business. Depending on the type and nature of the business, scope of business and the compliance frameworks adopted by the geographical location every business has a high or low level of risk. The analytical use of information and business intelligence, and the application of due diligence programs enables firms to make better quality decisions and maximize the value of every transaction, every contract and binding obligation they propose to enter into.
The term due diligence is used in the business world in various contexts. With respect to transaction advisory services it means conducting investigation in order to evaluate a potential business opportunity. Depending on the type of service provided, due diligence may be a legal or voluntary obligation to conduct an investigation. A comprehensive due diligence program assesses the business opportunities from all possible angles, evaluates the risks and returns, as well as identify the potential value drivers and areas of improvement before signing the contract.
The objective is to obtain and evaluate multi-sourced business intelligence and analytical information and using it to make informed business decision when:
- Entering new markets
- Entering new contract for services
- Acquiring or merging with other businesses
- Making new investments
These investigations and business intelligence reports are necessary to understand the real degree of risk involved, following a certain standard of care when dealing with them and having a certain post-acquisition or post-business agenda.
If you are planning for a merger or acquisition, business restructuring or cutting out other similar business deals, you have benefit from the business intelligence in one or more of the following ways.
- Conducting an inquiry asking all the questions relating to the transaction, including the procedure of buying, methods of structuring the acquisition, ascertaining the fair value and how much you should be paying.
- Conducting an examination of the business of the potential target for merger or acquisition. You can either conduct a self due diligence or a reverse due diligence which involves the evaluation of target business by a third party observer.
- Getting the relevant knowledge and details relating to shareholder value and fair value analysis.
- Learning about the current market situation, industry practices and policies.
- Acquainting yourself with the material post-acquisition matters that may arise.
In business world proceeding with caution and detailed analysis is the best policy and due diligence is your best bet at it.