Due Diligence Landscape Overview

3min

July 12, 2024

Due Diligence Landscape

General what is Due Diligence?

Technology Due Diligence

Financial Due Diligence

Legal Due Diligence

HR Due Diligence

Product Due Diligence

Commercial Due Diligence

Infrastructure Due Diligence

Intellectual Property (IP) Due Diligence

IT Due Diligence

Digital Due Diligence

General what is Due Diligence?

Due diligence is the comprehensive investigation and evaluation process conducted before the finalising of an investment or acquisition. It involves the assessment of the target company’s condition to permit informed decision making. The primary goal being to identify any potential risks or liabilities to ensure transparency throughout the transaction. 

The process of due diligence has evolved from the two main streams, Legal and Financial, to cover the entire landscape of workflows seen in modern day companies. Technology’s foundational role in start-ups has introduced a need for a suite of new due diligence streams to ensure investor confidence across all aspects of the company. 

Technology Due Diligence

Technology Due Diligence is the evaluation of the technological assets and capabilities of the target company. It often involves the reviewing of both software and hardware, the technical infrastructure; source code and IP, as well as the overall tech strategy. 

In many ways a Tech DD is about the core functionality of a company, as the technology is the real driver behind the investment decision. Unlike Legal and Financial DD streams, Tech DD is not just about compliance, it serves to reveal the true role of the company and how it adds value

  • Risks to cover Compatibility issues, technological debt, IP and IPR, security vulnerabilities, documentation, code contribution and scalability limitations
  • Key data points Source code, documentation, ticketing system, P&D salaries
  • Experts IT consultants, software engineers, data engineers, technology analysts

Financial Due Diligence

Financial Due Diligence is a detailed analysis of the company’s financial health. This includes the reviewing of financial history, compliance and financial controls. The goal is to ensure that all financials are above-board to permit a confident investment decision.

  • Risks to cover Hidden liabilities, inaccurate financial reporting, unsustainable revenue modelling, poor financial management
  • Key data points Balance sheet, debt obligations, tax liabilities, finance allocation
  • Experts Accountants, financial analysts, auditors

Legal Due Diligence is the process of conducting a comprehensive review of the company’s legal matters. This includes the examination of contracts, regulatory compliance, litigation history and IP portfolio. With the objective being to identify any legal risks that could pose a risk to the transaction.

  • Risks to cover Pending litigation, non-compliance with industry standards, contracts, governance issues
  • Key data points Shareholder agreements, client contracts, supplier contracts, employee contracts, open lawsuits 
  • Experts Corporate lawyers, compliance officers, IP lawyers, contract specialists

HR Due Diligence

HR Due Diligence examines the existing systems surrounding the human resources aspect of the company. This includes the reviewing of employment contracts, employee satisfaction, compensation structures and organisational culture. With the goal being the identification of any potential HR related risks, and compliance with labour laws.

  • Risks to cover Non-compliance with labour laws, employee churn, low employee satisfaction
  • Key data points employee contracts, salaries
  • Experts Employment lawyers, HR consultants

Product Due Diligence

Product Due Diligence is the assessment of the company’s products and services. It is the analysis of the full product lifecycle, development, market position and competitive landscape. The holistic evaluation of the product is designed to evaluate the sustainability, scalability and feasibility of the product, to ensure they meet market requirements and align with the buyer’s goals.

Commercial Due Diligence

Commercial Due Diligence assesses the target company’s competitive position within the market. This is evaluated through the inspection of key indicators such as customer satisfaction, sales performance and market share and trends. The goal being to understand the commercial viability of the company going forward, and ensure it can sustain and enhance its market position.

Infrastructure Due Diligence

Infrastructure Due Diligence involves a thorough review of both physical and operational infrastructure of the target. From facilities and equipment, the operational functionality of the company is evaluated. This is done to assess the condition of current infrastructure, and estimate the future needs, ensuring they align with the broader roadmap of the company.

Intellectual Property (IP) Due Diligence

Intellectual Property (IP) Due Diligence is the examining of a company’s IP assets, spanning from parents to code. This process ensures that all the IP is properly documented and registered to ensure its protection from infringement claims and disputes. This is done to verify the value and legal standing of these IP assets, which are often critical to a company’s function.

IT Due Diligence

IT Due Diligence involves the examination of IT assets, systems, processes, policies and procedures. An IT Due Diligence provides the investor with a clear view of the IT capabilities of any target, to ensure the IT systems support current operations and future growth, without risk or additional investment.

Digital Due Diligence

Digital Due Diligence gives potential investors a comprehensive understanding of a company's digital performance and growth potential, taking into account its competitors in the digital environment. This assessment helps understand how well the company leverages digital technologies to enhance business operations and customer engagement.

Daniel Jung
Daniel Jung
Director Transaction Services
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