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Home Resources M&A Glossary Due Diligence

M&A Glossary

Due Diligence

The thorough verification and investigation of a business after a letter of intent is accepted to determine if the parties wish to proceed with the transaction.

Tips

Due diligence ranges from 30 days to 60 days for most transactions. Traditional or technical due diligence focuses on financial information, taxes, legal and regulatory compliance, environmental compliance, human resources, contracts, information technology, and so on. Strategic due diligence explores whether the potential of the deal is realistic by testing the rationale for the acquisition.

Related Resources

M&A Due Diligence Preparation

M&A Due Diligence | Checklist & Overview

M&A Basics | The Term Sheet

M&A Basics | The Letter of Intent

Related M&A Terms

Data Room / Deal Room / Document Room

A central location for due diligence materials provided by a company to potential buyers for the purpose of inspecting confidential data and materials in connection with the acquisition of a...

Deal Structure

The legal method of structuring a transaction -- either as an asset sale, stock sale, or merger. Related Resources Selling Your Business | Asset vs. Stock Sale How Does Entity...

Depreciation

An annual tax deduction that allows for the loss of value of a capital asset, such as a business vehicle or real estate improvement, due to wear over a period...

Discount for Lack of Control

A discount taken when valuing an interest in a privately held business to account for lack of control, typically due to a minority interest. Example If a company is valued...

Discount for Lack of Marketability

An amount or percentage deducted to account for the inability to easily sell the shares of a privately held business and the difficulty in converting those shares to cash. See...

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