Due diligence
The pre-transaction audit conducted by an acquirer or investor before closing a deal. It covers financial, legal, tax, employment, technical and commercial dimensions, with the objective of verifying disclosed information and identifying undisclosed risks.
In practice
The most common deal-breakers: customer contracts with no assignment clause, unprovisioned tax liabilities, poorly documented intellectual property, and revenue concentration in a single customer above 30% of sales. A standard data room contains three years of accounts, significant commercial contracts, key employment agreements, IP assignments and corporate governance records. Preparing these documents proactively is a recommended governance practice well before any transaction.