A Better Due Diligence Process, Part 2

[Charles Bacon]

Perform a Due Diligence Audit

The effective due diligence system incorporates all information about processes throughout the corporation, and reflects how the pieces work together (or don’t). The first project is an initial corporate due diligence audit. To successfully complete this assignment, the new due diligence department will typically need help from outside services. The audit process traditionally comes from accounting firms, law firms, and industry specialists. While these sources are critical, they are focused on their own accepted expertise, experience, and viewpoints, and do not include all parts of a comprehensive due diligence process. Nor typically do they examine the interplay or cross-dynamics of their specialties across the organization. The view through a soda straw is pretty narrow. The team needs to ensure the corporate due diligence audit is fully inclusive and reflects operational realities and interdependencies.

Some critical aspects of a corporate due diligence audit should include:

• Accounting Systems & Internal Controls
• Analysis of Present & Future Products & Services
• Assumptions for Projections
• Attendance at Seminars, Conferences & Shows
• Business Plans
• Brand & Reputation
• Capital Expenditures
• Competitive Intelligence
• Computer Systems & Capabilities
• Contracts
• Corporate Acquisition Candidates
• Corporate Budget
• Corporate Culture
• Credit-Reporting
• Customers
• Decision Processes
• Disaster Recovery Systems & Plans
• Employee Benefit Systems
• Employee Hiring & Retention
• Employee Satisfaction
• Equity Compensation
• External Market Environment Assessment
• Financial Analysis
• Financial Statements
• Future Earnings Stream
• Future Expansion Projects
• Industry Publications
• Insurances of All Kinds
• Intellectual Property Policies & Assets
• Internal Communications Strategy & Media
• Internal & External Business Documents
• Internal Audit Function
• Key Relationships
• Key Senior Positions
• Litigation & Administrative Actions
• Management Communications
• Management Systems
• Management Succession Systems
• Market Research
• Methods of Evaluating Existing & New Products & Services
• Methods of Marketing & Sales, Pricing & Pricing Strategy
• New Products & Services Investment Evaluation
• Objectives & Objectives Set for the Business
• Organization Chart, Existing Team & Planned Team Growth
• Organization Development
• Outside Contractors
• Outside Professional Firms
• Performance Reviews
• Personnel Training & Development
• Plans for New Locations
• Press Interactions
• Relationships with Vendors, Suppliers, & Alliances
• Research & Development
• Sales & Marketing Relationships
• Strategic Planning Processes
• Strengths & Weaknesses of the Organization
• Technologies In Use by the Organization
• Technology & Scientific Trends

This list is long, but far from all-inclusive and should not limit all the aspects that must be considered for a complete corporate due diligence audit. The important thing is to “think” comprehensive, integrated and interrelational.

Next: A Better Due Diligence Process, Part 3: The Due Diligence Audit