The
term "due diligence" is synonymous with "background check" and refers
to the period during which buyers make sure they have all the
information they need to proceed with the transaction. At this point
buyers are focused on a particular business that they are seriously
interested in purchasing.
Practically,
due diligence means a complete and comprehensive effort is made to
determine what could happen to cause a venture to go wrong and identify
the various negative effects that could occur if a venture doesn't
perform as planned, or actually fails.
Over
the years, due diligence has been used by the non-security sectors of
the marketplace - instead of the word "research - to apply the
practical definition above to any venture, regardless of size or
ownership. For example, someone working on starting or purchasing a
business would conduct due diligence on the various elements that could
negatively impact the business' success, such as: competition, capital
access, location, product availability, financial records, etc.
