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Depending on the type of company involved, and the nature of the transaction, the due diligence process may include not only financial and tax reviews, but also investigations into recent, on-going, and anticipated legal proceedings. Labor relations issues, environmental risks, and market factors might be the focus of a due diligence review, or they might be peripheral to other areas such as intellectual property, insurance and liability coverage, or immigration.
Due diligence in the age of the Internet is a simple matter, at least at the initial stages. It isn't difficult, for example, to run a search for the name of someone you're thinking of working with or hiring. You can find out from sites such as LinkedIn and Facebook what jobs they claim to have had and where they went to school.
In my own personal case of having done poor due diligence, during the final stages of closing a multi-million dollar venture capital deal my wife discovered that the company’s management team included a convicted felon. In extreme cases, failure to adequately conduct due diligence reviews can have even more serious consequences.
My brother's life was threatened recently by a jealous colleague who, it turns out, didn’t have the professional healthcare credentials he claimed -- something that should have been discovered by his hospital’s pre-employment due diligence.
In one of the worst recent cases of failed due diligence, children have died, and more will be lost. The tragedy began when intentionally falsified data was used to suggest that common childhood vaccinations produce autism. Some parents now refuse to vaccinate their kids, putting their and other children’s lives at risk from preventable diseases. Due diligence, properly carried out, could have revealed the fraud, and might have prevented this ongoing tragedy.
So, please, do do the due diligence that you should do, and do so well. The financial success or survival of your business may depend on it.
Tom Harnish is a serial entrepreneur. Always on the bleeding edge of technology, he learned what works (and what doesn't) leading projects, products and companies to success (mostly). He can't play a lot of musical instruments.
Check your balance, review recent transactions and pay your bill on the go.
Kok-Yong Tan 1 year 2 months and 10 days ago
Using Linked-In or Facebook to research someone is silly since they are updated by the person him/herself. They can either not put anything in or make anything up if they are wily enough! Any HR person who uses Linked-In or Facebook to verify anything needs to have his/her head examined.