Whether you are the incumbent or the successor/buyer, it is important for the business to be assessed through due diligence before you begin any other step in the transfer process. The main goal of due diligence, which can be carried out by a public accountant or by a lawyer, is to determine the real value of a business. For the incumbent, it provides an assessment of the operations and the financial situation of his or her business. For the successor/buyer, it provides a way of verifying the truth of the incumbent’s statements about the business. In addition, it also makes it possible to ensure that the business has no hidden defects. Due diligence usually covers the following areas: the operations of the business, its intellectual property, its human resources, and any other assets belonging to the business, as well as any related legal, accounting, tax, or environmental issues.
This means that due diligence is highly useful during the negotiations over the sale or purchase of a business.