My LinkedIn Answers #7

Seeking to develop a list of the important questions each party discusses with the another during the beginning the due diligence process.

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Firstly, we need to give a definition to due diligence to get everyone on the same page. Let's put it this way. Due diligence is the process by which both parties use to confirm or disconfirm the business reasons for the proposed capital transaction.

Some of the key questions we need to bring to the fore are:-
- strategic fit of the two entities.
- net effect on the combined shareholder value.
- overall effect on fulfilling the customer needs.
- cultural fit.
- litigation risks.
- risk orientation.
- environmental issues.
- employee support.
- management orientation.
- IT systems compatibility.
- business processes compatibility.
- compatibility of internal business processes and operations.
- complementary strengths of products or services.
- anti-competitive behavior.
- tax implications of the combined entity.
- legal framework.
- revenue recognition policies

Equally important are the financial considerations:-
- cash receipts
- accounts receivable
- accounts payable
- liability and debts
- customer billing
- inventory ordering, controls and management, vendor and customer contracts