Due diligence in acquisition
Acquisition due diligence examines selected financial, commercial, legal, operational and other information about a target before a transaction. It can test assumptions behind forecasts and synergies, identify liabilities or restrictions, and inform price, warranties and integration planning. Its scope and level of assurance depend on the agreed engagement; not every due-diligence assignment is an audit or assurance engagement. Incomplete access and uncertain future performance limit the conclusions, so findings should be linked to specific decisions and further evidence.
Worked example
A buyer investigates a target's customer contracts, debt covenants, major litigation and forecast sales. Discovering that a key contract requires consent on change of control leads the buyer to revise its valuation and conditions.
Common mistake
Treating a due-diligence report as a guarantee that every liability has been found or as automatically equivalent to a statutory audit opinion.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | AFM | Direct | September 2026–June 2027 |