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Due Diligence

The definition of due diligence relates to those investigative activities aimed at obtaining data and information concerning the subject of a negotiation. The purpose of this type of activity is to assess the appropriateness of a deal and identify any risks or problems associated with it, in order to negotiate the terms and conditions of the contract and to prepare effective instruments of guarantee, indemnity or compensation.

What is Due Diligence?

The meaning of due diligence, which can be translated as "due diligence", derives from a concept in American private and commercial law. Essentially, it is the activity of investigating the situation of a company, which is carried out on behalf of buyers before, during and after the acquisition of real estate, companies, securities or shares on the stock exchange.

So, what does Due Diligence mean? It is a form of risk assessment that serves to clarify to the buyer the risks and rewards associated with the purchase or sale in question.

How is Due Diligence done?

The buyer, or an expert appointed by the buyer, requests the launch of the due diligence process. On the other hand, the seller co-operates and provides a data room containing a range of information indicating the risks, weaknesses and strengths of the purchase action. Although this is data and information provided voluntarily by the seller, it is important that it is equally true and reliable, especially with regard to risks. Who can use due diligence? It depends on the relationship with business partners and the type of business acquisition.

What are the areas of Due Diligence?

In Italy, the use of due diligence processes is becoming more and more frequent and mainly concerns the collection of information on the subject of a transaction and its verification, in order to assess its market value and potential return. In particular, Due Diligence activities are carried out mainly

  • for corporate or business acquisitions or disposals;
  • in the event of proceedings for the issuance of financial instruments (placement of shares or bonds);
  • in case of purchase of shares of closed-end investment funds by asset management companies;
  • in the case of valuation and estimation of properties subject to legal proceedings, sale and purchase and, therefore, placed as collateral for credit exposures.

Usually, a third party carries out this type of process, a figure unrelated to either the bidder or the potential buyer.

Reputation Due Diligence

Reputation Due Diligence is a highly sought after activity nowadays: corporate reputation has become one of the fundamental assets of a company and is equivalent to the expectation that stakeholders have on its future decisions by virtue of past decisions. Therefore, the reputational Due Diligence is necessary to protect oneself from the reputational risk: in the analysis of the suppliers, in the acquisition of a new partner, in the start of a partnership with a company, in the appointment of a prominent figure.

Phersei Investigazioni is a reference point in the field of Reputation Due Diligence and reputational risk analysis.

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