Contents and Tips while drafting a Due Diligence Report

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INTRODUCTION

A Due Diligence Report ("DDR") is a document which includes a proper explanation of financial status of a Company and the Company's standing in the market. A DDR is very important as it exposes the Company's actual status and its reputation is completely dependent on this document. A DDR contains the following headings which helps in understanding the document better:-

a. Explanation for the research topic

b. Corporate reports, legal records, research documents etc.

c. Company's SWOT analysis

d. Any liabilities, debts etc.

e. Market research, statistics, inspections and other information 


AREAS OF FOCUS

A DDR focuses on the following aspects of the organization:-

a. Evaluation of Company's feasibility to enter into a proposed transaction for which due diligence is conducted.

b. Examination of financial records of the Company to understand the its financial stability.

c. Examination of the Company's working environment

d. Reputation of the Company's employees

e. Pending lawsuits, if any

f. Technology available for the Company

g. Development of coalition between the Company and its associates or subsidiaries to aid in decision making.

h. Any agreements entered between the Company and any other entity

i. Real estate information


GOAL OF A DUE DILIGENCE REPORT

1. The basic aim of a DDR is to identify imminent risks before a transaction is finalised. 

2. Information gathered in this report is important for decision making so that in case of any faults in DD process, it can be negotiated.

3. This report helps the Company to understand how to improve itself in the market.


TIPS WHILE DRAFTING DDR

a. If a problem arises then it should be described along with its consequences.

b. List of documents to be included.

c. Avoid unnecessary information.

d. This report should be made patiently and diligently. 

e. Details should be mentioned but not too much so that the reader does not lose interest while going through the report.

f. Ask if something appears to be missing in the report.

g. If a person does not have a legal background then he should seek a lawyer to prepare the report.

h. Examination of concerns and obstacles should be done so that critical issues is not missed.


CONCLUSION

The manner of conducting due diligence is not governed under any laws. It is an important step when investigating and determining the status of the Company.

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