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Due Diligence

Definition

Due diligence is the comprehensive investigation and analysis a buyer conducts before completing an acquisition. It covers financial, legal, operational, tax, environmental, and commercial aspects of the target company. The goal is to verify the seller's representations, identify risks, and confirm the investment thesis.

Context

In Ep. 1, Karl Rectanus uses the term in a broader entrepreneurial sense: he spent "almost a year in due diligence trying not to start Learn Platform" — researching the market, evaluating whether an existing organization could pursue the opportunity, and gathering enough conviction before committing. This pre-founding diligence preceded the more conventional M&A usage.

In Ep. 23, due diligence appears in its standard M&A context. Chris Reilly notes that thoroughness in diligence is a positive signal — but raising issues already disclosed in the CIM reflects poorly on the buyer. QofE reports are a key component of financial due diligence.