Due Diligence: Four Questions to Make Smarter Acquisitions

Private equity firms, lenders, lawyers and other interested parties conduct due diligence to kick the tires on a potential transaction or target acquisition. Due diligence means the comprehensive review of a target company’s financial, operational, customers and markets, legal, tax, HR and IT functions prior to the completion of a transaction.

In short, due diligence is the process of getting the answers to these four primary questions:

  1. What are we buying?
  2. What is the target’s stand-alone value?
  3. What are the synergies and the skeletons?
  4. What is the walk-away price?

In turn, these primary questions result in related questions. Our guidance follows.

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