M&A due diligence is a crucial process that assists acquirers in assessing the legal, financial commercial, and other aspects of the target company prior to completing an acquisition. The information gained through due diligence is critical for a successful integration and can identify potential risks or opportunities that would otherwise be overlooked.

Although each M&A deal is different, there are certain activities that are common to all deals. This includes gathering and reviewing financial documentation and evaluating compliance with regulations and assessing the performance of operations. Additionally, specialized kinds of due diligence such as human resource and intellectual property can be utilized to provide additional insights.

Due diligence can take months and overwhelm M&A teams. This is especially true when the acquiring firm must complete a variety of complex tasks within a limited timeframe. The time constraints increase the chance of ignoring critical risks, taking rushed decisions, or overlooking crucial red flags.

It is also crucial to understand that a due diligence process requires careful attention to confidentiality. M&A teams must realize that the benefits of a board of advisors seller as well as their lawyers and the confidentiality agreement all have a responsibility to safeguard sensitive and confidential information. Professional advisors are often needed to manage the process and ensure all information is accurate and relevant.

The sensitivity of data collected during due diligence makes it vital to organize and store documents in a manner that will make them easily searchable. The organization of materials alphabetically or numerically, for example makes it easier to locate the right document.