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Generally, the term ‘Due Diligence’ gives an impression of a detailed and cumbersome research process. However, that is not completely true. A Due Diligence process may range from a high level review to detailed and comprehensive research.

What’s a ‘High Level Review’ – As opposed to what the name suggests, a High Level  Review is a quick and summarised review. It is generally conducted where the commitment and stakes involved in a transaction are not substantial for the companies concerned. A High Level Review may involve review of important documents, interview with the management of the company, interacting with employees of several departments, etc. However, sometimes, a high level review could be part of a bigger strategy; the bigger strategy being conducting Due Diligence in a phased manner.

What we mean by conducting Due Diligence in a phased manner.

Mergers, acquisitions, takeovers, investments, etc are events that call for detailed and comprehensive research into the target’s business because the stakes and commitment involved are substantial. However, plunging directly into a detailed Due Diligence process can make the team feel lost in a sea of information. Not to mention the fact that the costs involved also shoot up. In such cases, the Due Diligence should be carried out in a phased manner.

Phase 1 – During this phase, a High Level Review of several aspects of the company viz legal, financial, operational, taxation etc. is carried out. Next, on the basis of results of this quick review, the areas that need detailed research are ascertained. Generally, the following areas are selected for a detailed research:

  • Important areas – areas important with respect to the transaction in question
  • Problem areas – areas where discrepancies were spotted during high level review
  • Vulnerable areas – areas where the management lacks strong controls

Phase 2 – A detailed research is undertaken into the selected areas.

Phase 3 – A deeper investigation is carried out into the problems identified to ascertain its impact and potential future impact on the target business and the transaction in question. If need be, these phases can be further broken into small processes or consolidated into one process.

Therefore, Due Diligence only means Reasonable Care. The extent of ‘reasonable’ depends on complexity, size and nature of the transaction and how substantial it is for the companies involved.

Anchal, co-founder at Tofler (, is a Chartered Accountant and a Company Secretary. Tofler offers RoC Documents, Data and Search Reports for EVERY Indian company.

Anchal has earlier worked with Pricewaterhouse Coopers in Mergers and Acquisition and has more than 5 years of experience in Financial analysis, Compliance, Statutory filings, Due Diligence, Business restructurings, Audit, Business laws etc.


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