Due diligence is critical during any transaction, be it a potential merger and acquisition, investment, loan or financing. The general principle of buyer beware makes it important for any investor or purchaser to examine all material information as part of the due diligence exercise.
There have been numerous instances where mistakes in the due diligence process have proved to be costly after the completion of the transaction. It is the responsibility of the buyer to investigate and analyse the assets, liabilities, records, financials, and customers of a business to ensure that what is being acquired aligns with its expectations. It is the responsibility of the seller to correctly disclose what is necessary and material for the buyer to make an informed decision. The seller or target is asked to provide a prospective buyer with the information that the buyer needs to satisfy its own due diligence inquiries and to evaluate the target’s business.