All About Due Diligence |Format|Type|Need

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All About Due Diligence |Format|Type|Need

 Meaning :- Due diligence is a process of thorough and objective examination that is undertaken before corporate entities enter into r transactions such as mergers and acquisitions, issuing new stock or other securities, project finance, secularization, etc.

Type of Due Diligence:-

The type of due diligence totally depends on the type of transaction and what is the need of Stake holder.
Due diligence may be of following types:

· Commercial due diligence – Review of industry, market, and business model of the issuer.

· Reputation due diligence – Review of credit worthiness and reputation of individual counter parties.

· Financial due diligence– Review of taxation , financial position of company, policies and other  internal controls.

· Legal due diligence – Review of documentation to identify potential legal issues that may be risks/impediments to the

(i)transaction or

(ii) in the general operations of the issuer, that may affect the value or consideration in connection with the transaction.

What is the need for Due Diligence

o Identify issues relating to structuring and documentation.
o Identify legal and contractual impediments. Confirm / verify representations and warranties
o Undertake processes to verify representations and warrants being provided. Validate Business Plan
o Examination of issues and key areas that need to be addressed in the business plan and determining the impact of the same on the proposed transaction.
o Identify, understand and if possible quantify risks and develop strategies to minimize the same. Transaction Management
o Formation of suggestions and solutions to deal with issues.
o Depending on the risks identified, place the client in a better position to negotiate or adjust the cost of the acquisition or tailor the warranties and indemnities

End use of Due Diligence:-

o Identification and mitigation of risks in light of market practice and legal requirements.
o Changes in structure of the transaction.
o Price adjustment.
o Conditions precedent.
o Representations and warranties.
o Verification of disclosures.
o Retention of purchase price.DUE DILIGENCE
o Indemnity.
o Conditions after closing the transaction.

Also Download the format for due Diligence report here

Due Diligence sample report Format

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