Due diligence is an integral part of any partnership, investment or business deal. It involves a thorough investigation of a company’s financial records, compliance with the laws, and any potential risks.

The creation and use of a due diligence checklist can help to guide conversations, quickly detect obstacles to M&A transactions, and enables the stakeholders to concentrate on strategy as well as structure and execution. A due diligence checklist reduces risk by ensuring everyone is on board with the scope of the investigation and the required documentation.

The due diligence request can contain a variety of documents depending on the nature and magnitude of the transaction. All M&A due diligence requests must include certain fundamental elements:

Complete financial reports for the last three years are required for most M&A due diligence reviews. These reports can give a clear image of a company’s financial situation and highlight opportunities to grow.

Other aspects to consider include the target’s financial obligations and its capital structure. Other areas to be considered could include a review of internal processes such as supply chain, the technology infrastructure and management team.

A complete due diligence checklist will look at a company’s environmental safety and health practices and any regulatory violations. It should also consider the company’s position on intellectual property rights and how it plans to handle the event of a data breach. A due diligence audit should also evaluate the company’s contingency plans and disaster recovery plans.

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