Due diligence

Due diligence is what is done in order to check that everything is as it appears. In an investment context it usually refers to the checks carried out before a major transaction. For example:

Due diligence often implies gaining greater access to a company's accounts than is available in the published accounts. This is one reason why, when possible, an agreed takeover is preferable to a hostile takeover - the target company is under no obligation to allow special access to its accounts, but may be persuaded to.

This is also a good reason for investors to be cautious about any company that has received a takeover approach that has failed to materialise after the would be bidder started due diligence. The bidder may have found problems that are not evident in publicly available information.

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