Due Diligence

Due diligence starts once the parties enter into a non-disclosure agreement (NDA), Memorandum of Understanding (MoU) or other agreement to create legal relations. This process is typically facilitated by the sell-side corporate advisory firm engaged by the Seller in a M&A deal or Borrower in a financing transaction.


First of all, interested parties would be invited to an initial due diligence process with a defined timeline (e.g. 2-4 weeks, depending on extent of information available). This would include providing access to information contained in a data room, responding to questions posed to the seller or borrower, attending in a face-to-face management presentation and even doing a site visit on important assets.

At the end of the initial due diligence phase, it is typical for the seller or borrower to request a firmer expression of interest or a conditional offer. A further detailed due diligence phase may be subsequently arranged for deals that are more complex in nature, involve larger deal sizes, or involve high profile companies. The data room would be loaded with new information e.g. commercially sensitive and privy information which would have been omitted or redacted at the initial due diligence phase. Given this phase is opened to almost-exclusive parties, a copy of the more advanced draft transaction and ancillary structuring documents would also be included.

Due Diligence Areas and Information Requests

Here are some of the common areas for due diligence including the key information requests (non-exhaustive):

  • Memorandum and articles of association (and subsequent amendments)
  • Shareholder registers and share certificates
  • Minutes of annual and extraordinary general meetings of shareholders
  • Minutes of board of directors
  • Corporate holding structure charts
  • Shareholder loans
Legal and Regulatory
  • Joint venture agreements
  • Sales and purchase agreements
  • Government approvals, permits and licenses
Debt Facilities
  • List of existing banking facilities
  • Corporate and project loan documentation
  • Securities pledged and registrations
  • Inter-creditor agreements
  • Escrow accounts
  • Facilities access agreements
  • Processing and transportation agreements
  • Health, safety and emergency reports
  • Products and services contracts and invoices
  • Audited financials and management accounts
  • Bank statements
  • Working capital ageing schedules
  • Economic models
  • Model audit reports
  • Contingent liabilities, including ongoing litigation, claims and unresolved disputes
  • Off-balance sheet issues
  • Trapped cash and thin capitalization issues
  • Tax payer registration numbers
  • Tax residency certificates
  • Working capital issues
  • Tax structuring and planning
  • Stamp and transaction taxes
  • Transfer pricing issues
Technical and Engineering
  • Feasibility studies
  • Front End Engineering Design proposals
  • Independently-certified reserve and resource reports (commodities)
  • Abandonment and site restoration obligations
Market Analysis and Pricing
  • Revenue price forecasts
  • Inflation, FX and other economic forecasts
  • Demand and supply Analysis

For larger, more complex transactions:

  • Human Resources; focused on quantifying provisions for pension plans, severance and service payment obligations triggered
  • Insurance; especially in relation to the adequacy of existing insurance policies
  • Environmental; impact analysis, monitoring plans and audit reports
  • Investigative; discreet field inquiries and background checks