Due diligence: Difference between revisions

Due diligence is the effort a party makes to avoid harm to another party. Failure to make this effort is considered negligence. Quite often a contract will specify that a party is required to provide due diligence.

A (US) example of a "due diligence report" is a Phase I Environmental Site Assessment (ESA), which is performed to determine potential environmental conditions that may cause harm to the surrounding environment.

Due Care: is doing something about Due Diligence.

Business

In finance, the term can refer to the activities of pension or investment fund managers in keeping track of the operations, solvency, and trustworthiness of the managers of a corporation in which their fund is invested, or those of the managers of an acquiring corporation toward a target corporation.

A "due diligence report" is often prepared to discover all risks and implications regarding a decision to be made. Information may be gathered by the due diligence team either by external analysis and research as is typical during due diligence for venture capital funding or information may be formally laid out using a secure data room used in due diligence for mergers and acquisitions. The gathered information may, for instance, relate to the value of intellectual property owned by the target company, any pending litigation against it and so on.