Types of Due Diligence?
Financial due diligence
Financial due diligence is a comprehensive and investigative process aiming to assess a
company’s financial strengths by examining its financial data, which may include historical
sales, expenses and working capital, as well as key assumptions used in management’s forecast.
The aim of financial due diligence is to help investors see if the deal is worthwhile and have a
better understanding of the potential risks and opportunities before signing on the dotted line.
Financial due diligence is typically carried out before mergers and acquisitions. Other
circumstances that warrant financial due diligence may include when a company looks to get
additional funding or when it is in dispute with another organisation.
Legal due diligence
Legal due diligence reviews legal risks that exist in a company, stemming from its organisation
structure to contracts that it has with its suppliers, clients, partners and also employees. In
addition, how the upcoming deal is structured may also have legal implications.
Common areas that our legal due diligence team reviews include:
Ownership of a company (share certificates issued to board members, directors or key
stakeholders)
- Management structures
- Company procedures
- Legal obligations such as loans
Ongoing litigation, if any
Human resource due diligence
Human resource due diligence assesses the risks and opportunities pertaining to the employment
structure of a company. It usually includes HR operations, employment contracts, grade and
salary bands, leave policies, benefits, as well as any on-going disciplinary cases. The aim is
to understand the company culture of a target company and see how it can facilitate a smooth
transition.
International due diligence
This form of due diligence is vital to companies that already have operations in numerous
countries and legal jurisdictions or are planning to go international. International due
diligence is the process of acquiring and analysing local information not publicly available
outside of the location. At
Trademark Frontier, we have helped companies to obtain:
- Verification of a foreign business partner or client
- Political situations in another country
- Local economic landscape
- Potential risks pertaining to local illegal activity and/or corruption
- Other local issues
Over many years, we’ve developed a network of trusted intelligence experts in Europe, the Middle
East and the Far East, including in countries which the USA government and the European Union
would classify as ‘high risk’. The list of high-risk countries changes from time to time, but
essentially they are countries said to be vulnerable to corruption, support money-laundering
schemes, or even have regimes that are linked to terrorism financing. If your organisation has
rushed to invest in one of these countries, you or your company may become a victim of the
country’s distinctive political systems or policies. This is why companies turn to our
international due diligence team first. We are here to help you verify a foreign company’s
legitimacy and undisclosed facts, along with the business environment in that particular
country.