Term: Due diligence

The rigorous vetting and inquiry into a potential investment that must take place before any agreement is finalized. Private equity firms are required to conduct very thorough due diligence into the finances operations management environmental impacts and market conditions of a potential acquisition among many other potential items of inquiry. Usually an array of service providers are used at this stage such lawyers accountants and specialist consultants. As in: We always look at international tax liabilities as part of our due diligence.

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