All you have to know about Due Diligence

Due Diligence can be defined as a legal audit through which a review or exam of the different areas in a company is performed. Its purpose is to facilitate information to the potential purchasers so that they can know the real situation in which the company is.  

Although it can be performed by the own seller,  the purchaser is who, in most of the cases,  requests it. 

 The length of time is unknown. Some of them take 3 weeks for executing the result, and others need 2 months. It is proven that the more time invested, the better results turn out / are, although it is recommended not to exceed 60 days. 

 The Due Diligence process considers financing, accounting, tax / taxation, commercial, labor, and technological aspects.  


  • To reduce investment risks when acquiring the business.  
  • To uncover hidden liabilities that have not been previously specified, e.g., debts. If this occurs, the deal can be renegotiated.  
  • To determine possible contingencies that may arise in both the short and long term. These can affect the price of the sale and purchase.  
  • To improve the understanding of a business. That is, to understand it as a whole, as well as more specific aspects (economic or financial).  
  • To perform a SWOT analysis of the company.  
  • To plan a strategy to increase profits after obtaining the business.  
  • To limit liability. All contingencies that may arise will be assumed by the buyer and the financial entity.  

Advisory process 

In order to carry out a Due Diligence process effectively, several phases must be taken into account:  

  1. Planning. The document to be worked on will be created and a confidentiality agreement will be signed.  
  2. Analyzing. All the company’s private documents will be analyzed.  
  3. Interviewing to find out those data that have not yet been obtained, as well as to clarify any doubts. They can be either by telephone or in person.  
  4. Collecting public data. For example, those found on the Internet, in the press or in the Official State Gazette (BOE). All sanctions and data on politically exposed individuals and negative reputational news will also be examined. Country risk assessments will also be carried out.  
  5. Technical verification  

How many types of Due Diligence are there? 

Due Diligence for…  

  • An acquisition. Careful management / monitoring is necessary, since after signing the contract for the acquisition of a company the new owner will be responsible for everything.  
  • The purchase of shares in a company. Whether the investment to be made is useful can be verified with it. The buyer can confirm the asking price corresponds to the market price, thus avoiding financial fraud.  
  • The purchase of real estate.  
  • The companies. Investigation of the commercial partner of a company with which a commercial agreement is to be made. It serves to ensure investment protection.  
  • Evaluation of a company. Audit to know the economic liquidity of the company, in order to have a complete picture of the value of the business.  
  • The evaluation of real estate. Aspects to be considered to verify that the price of the property is correct are the technical, legal, and safety conditions.   
  • The mortgage. A check is carried out by a bank to assess the viability of issuing a mortgage. The financial situation is investigated, as well as the real estate assets of the person requesting the mortgage.  
  • Security. Evaluation of the legislative compliance of a place, as well as individual aspects that are related to a company (e.g., compliance with standards). 

The results will be captured in a final report. The information obtained guarantees advantageous activities as well as protecting our interests. 

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