The due diligence process is similar in most projects. In the case of company takeovers, the due diligence is generally carried out by the buyer with the help of external advisors (exceptions are bidding procedures, which are not explained in more detail here). Depending on the issue, these can be lawyers, auditors or experts for specific audit fields.

Plan a structured due diligence process

Due diligence uses many different sources of information. The basis for this is, in particular, company documents or data and discussions with the management of the target company. We have provided an overview of the most important types in the article on due diligence. Due Diligence summarised.

Usually, buyer and seller agree on a time period for the due diligence. For smaller transactions, due diligence can be completed in a few days. Here, to ensure confidentiality, a selling entrepreneur will often compile the information himself or involve only a few trusted people in the company in the project. The larger the company, the more extensive and time-consuming the due diligence process becomes. In very large transactions, a DD often takes several months to a year.

Inappropriate questionnaires complicate the due diligence process

Before the DD begins, the buyer and seller usually exchange a very strict and tightly worded confidentiality agreement. Subsequently, the sellers receive a catalogue of questions or a Due Diligence Checklistwhich provides an overview of the required information and documents. Particularly in the case of smaller transactions, care should be taken to ensure that the questionnaires are appropriate to the transaction. In particular, consulting firms operating nationwide often act here with highly standardised questionnaires, which sometimes greatly delay the scope and process of a due diligence.

Electronic data rooms support DD process

Due diligence is sometimes carried out directly at the target company. Much more often, however, the data is exchanged electronically or is available in special data rooms. It is advisable that the documents are provided in one piece. Otherwise, the due diligence process may be delayed or costs may increase significantly. Especially for smaller transactions, it is advisable to request all the required information in one piece.

In some cases, a fee or assumption of costs is already agreed in the letter of intent in the event that the sale of the company does not take place after a positive due diligence.