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Due Diligence: It’s Worth the Effort

Frank Cutruzzola, President and Director of Cyber Investigations at W3 Intelligence Research Group Inc, a licensed private investigation agency based in Canada, discusses due diligence and its vital role in making more profitable decisions in business.


Due Diligence: It’s Worth the Effort p
Frank Cutruzzola

Due diligence is commonly defined as the examination and application of caution that a reasonable business or person is generally anticipated to take before coming into an agreement or contract with another party.

Although it may be a legal requirement, it is more commonly related to voluntary analysis. A general illustration of due diligence in various businesses is the practice through which a purchaser of a business assesses a company of interest or its assets for purchase. The model behind due diligence maintains that implementing this type of investigation adds considerably to informed decision making by enriching the volume and quality of information that will then be accessible to decision-makers and by making sure that this information is used in consideration associated to its costs, benefits, and risks.

Due Diligence: It’s Worth the Effort p two

Hard Due Diligence – All about the numbers: Hard due diligence is related to data and numbers. This method is often thought of as the “conventional method” of due diligence and is most often an essential component of Mergers and Acquisitions. Most due diligence comes under this type with an emphasis on financial/accounting, tax and operations.

Soft Due Diligence – All about the relationships: Soft due diligence relates to dealing with people and the “human factors” of a business. It too has become an essential component of Mergers and Acquisitions with a growing interest as an important factor. It examines the culture of a business and the functions, proficiencies and outlooks of its people.

In the broad sense, due diligence is divided into several areas that impact the success of an investigation and include:

  • Finances: Financial statements, the company’s forecasts and projections, and inventory schedules.
  • Legal: Contracts, corporate documents, board meeting minutes, and compliance doctrine.
  • Human Resources: The company’s organizational structure, compensation and benefits, current vacancies, union contracts (if applicable), and any types of harassment disputes or wrongful terminations.
  • Operational: The evaluation of the state of technology, assets, and facilities and uncover any concealed risks or liabilities.
  • Business: The forecast of the impact and associated risks that the business deal may pose on procuring a company’s current customers.
  • Strategic Fit: Determines potential synergies, benefits of the business deal, and how well the two businesses would unite.

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Business Mergers and Acquisitions: A business background investigation is vital if preparing to acquire a business, invest in it, or enter into a relationship as a buyer, vendor, client, or partner. It’s key to know how well the business is operating, who its principals are, and whether there have been any historical concerns, for example, debt, taxes, regulatory compliance, or litigation, to mention but a few. A due diligence investigation may reveal particulars that a business may not have disclosed previously.

Business with a Prospective Client: Businesses that serve clients need to know that their prospective clients are dependable and trustworthy. Accountants, financial services providers, recruiters, law firms, and others risk not only income but also a loss of reputation if they do business with clients who are fraudulent or involved in unlawful activities. A due diligence investigation can aid in assessing a prospective client and reduce any impending liabilities.

Taking on New Employees: Due diligence can be a vital part of the employment process, particularly when filling key leadership positions. Due diligence adopts the additional step to validate that a job applicant will, in fact, be a suitable match for the company’s requirements and will not bring any hidden history that could impact the company’s character or the applicant’s ability to perform their work. Furthermore, it will assist in determining whether the job applicant will be a suitable fit into the company’s culture.

A company’s reputation is one of its greatest assets it has and must be safeguarded at all costs. Regrettably, one deceitful or fraudulent selection as a candidate or choice of investment can allow for significant harm to a company’s image, as well as negatively impact its ROI. Proper due diligence investigations guard businesses from damaging investments, unpleasant surprises, and legal concerns. Getting a more complete picture of the state and condition of a business opportunity through due diligence can substantially contribute to making better and more profitable decisions.

For more information, contact Frank Cutruzzola at or visit