What Is Reverse Due Diligence

Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing.

Due diligence is the process of reviewing the condition of a company to be acquired.

The purpose is to understand the company's current status, including risks, assets, liabilities, and potential opportunities.

Reverse due diligence is when the company being acquired reviews the condition of the acquirer.

Here are several reasons why one would execute reverse due diligence:

This validates the financial stability of the acquirer.

The acquisition process takes at least six months and requires a substantial amount of time.

It's important to know that the acquirer has the capability and resources to make the acquisition.

The acquirer has several options for how to manage the acquisition.

The acquired company could be integrated into the acquirer company, or it could be kept separate.

A reverse due diligence could help make that determination.

A reverse due diligence also determines the best placement of the acquired company's team into the acquiring company.

Reverse due diligence is as important as the diligence of the acquired.

Consider running a reverse due diligence on your next acquisition.

Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.

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