Due Diligence in Business, From Every Angle

Do you really know what your company is buying, selling, or saying? Across industries, there are specific situations where all stakeholders benefit from a detailed look under the hood. Due diligence provides a comprehensive look at the realities of a person, business, or industry to help organizations make informed decisions based on facts, not gut feelings.

Due diligence might seem like something firmly under the purview of the legal department, but it can affect specific departments, including marketing and sales.

What Is Due Diligence?

Think of due diligence as an audit for a specific area of your business or the entity as a whole. It’s a detailed, fact-based investigation of an organization, industry, department, or person designed not to incriminate but to illuminate. The goal is to learn everything to know within the scope of any impending decision: the good, the bad, and the ugly.

While the specifics vary based on the situation, any due diligence effort will cover all relevant aspects of a decision to identify risks and opportunities, establish value, and provide a comprehensive report of findings that may or may not include a recommendation.

Common Types of Due Diligence

The most well-known type of due diligence occurs during the formation of a partnership, merger or acquisition. Sometimes referred to as acquisition due diligence, commercial due diligence is a complex and often time-consuming process that looks at almost every facet of a target’s (the company being acquired) business. While some organizations may conduct periodic internal due diligence investigations, M&A transactions include all of the examples below.

This information is compiled into a due diligence report and submitted to the buyer. While specifics vary based on the parties’ agreements, the seller rarely gets a full copy of the due diligence report. Instead, they may review a summary of the findings or nothing at all. Since the buyer paid for the report, it holds the cards and typically chooses to withhold due diligence findings for a couple of reasons.

There are some good reasons to share the findings, however. When two companies are forming a partnership or merging, sharing due diligence often provides valuable information to improve operational efficiencies or raise major issues, such as industry non-compliance or legal risks.

Due Diligence in Marketing

Due diligence plays an increasingly significant role in marketing operations during mergers or acquisitions and operational reviews. While SEOs and designers may not be involved in the process, marketing departments always get a long look from outside buyers.

Marketing and M&A

Marketing departments typically fall under operational due diligence. However, they’re increasingly broken out as their efforts, along with the value of proprietary software, first-party data, and other digital assets comprise a larger share of a company’s value. The investigation endeavors to assign value to brand recognition, the company’s domain, email lists, and social media accounts while evaluating efficiency.

Vendor Due Diligence

Also known as third-party due diligence, vendor due diligence is researching an outside company before agreeing to work with them. This usually involves conducting due diligence before signing a project or retainer contract with a marketing agency.

Depending on the scope of the contract, the investigation could include any and all aspects of an acquisition or merger or focus on one or two points. Many brands focus on the agency’s historical resources and detect any potential conflicts of interest. For example, a brand may choose not to work with an agency that has past or existing relationships with an industry competitor.

Internal Review: Due Diligence In-House

As noted earlier, many internal marketing teams perform periodic marketing audits to learn the same things external audits try to find. The goal of internal marketing due diligence is to improve efficiency, determine the effectiveness of the brand’s marketing strategies, and identify opportunities to improve results. This effort usually augments a departmental SWOT analysis or a similar type of goal-setting.

It’s About Information, Not Blame

The goal of due diligence, internal or external, is information. While it may focus on a few criteria, it should always be conducted fairly and collect all relevant information, whether it supports an acquisition or pushes a buyer to step back from the negotiating table. For marketers, the process can be extremely beneficial and present new opportunities to improve results and grow the brand.