Due diligence.

In plain English

Due diligence is the structured review of a company before a purchase, an investment, or a securities offering. It covers financial records, contracts, litigation, tax exposure, technology, customer concentration, and regulatory standing. In securities offerings it also carries legal weight, because parties who conduct a reasonable investigation have a defense against certain liability claims for misstatements. Findings often change the price, add conditions, or kill the deal outright. The depth varies with the size of the check, but the purpose never changes: replace claims with verified evidence.

01Why it matters

Almost every avoidable investment disaster traces back to something a buyer could have checked and did not, which is why the process exists as a discipline rather than a formality.

02The math, step by step

A buyer reviewing a $30 million acquisition finds that one customer accounts for 45 percent of revenue on a contract expiring in eight months. That single finding can move the offer price or convert part of it into an earnout.

Illustrative example. The amounts here are hypothetical, chosen to show how the math works, not real quoted rates or figures.

03What this is NOT

04Receipts

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