Due diligence is the process of ensuring that all parties are aware of a potential deal. In this way, they are able to evaluate the risks and benefits of pursuing an agreement. Due diligence can help avoid any surprises that could undermine an agreement or cause legal issues after the closing.

Companies usually conduct due diligence prior buying the company or merging it with another. The process is usually divided into two main components including financial due diligence as well as a legal due diligence.

Financial due diligence is the method of analyzing the assets and liabilities of a business. It also evaluates the accounting practices of a business and financial history as well as compliance with the law. During due diligence, many companies request for audits or copies of financial statements. Other important areas of due diligence include supplier concentration and human rights impact assessment (HRIA).

Legal due diligence is an exercise that examines the policies and procedures of an organization. This involves a review of the company's legal status, compliance with laws and regulations, and any legal issues or liabilities.

Based on the type of acquisition the due diligence process can last up to 90 days or more. During this time, both sides usually agree to an exclusive period. This prevents the seller from seeking out new buyers or engaging in discussions. This can be beneficial for a seller but it could backfire when due diligence is conducted poorly.

It is important to keep in mind that due diligence isn't an event, but rather a process. It is a lengthy process and should never be rushed. It is essential to maintain open communication and, if possible to meet or surpass deadlines. If a deadline is missed it is essential to determine the reason and what steps can be taken to resolve the problem.