Valuation and investment
Due diligence
Careful checking of a target before you buy it.
Facts checked against sources onWhat does Due diligence mean?
Due diligence is the checking a buyer or investor does before a deal: whether the market is attractive, whether the target is as good as it looks, what it is worth, and what could go wrong. Commercial due diligence focuses on the market and the target's position in it. Private-equity cases are built around this checking.
Where does it come up in case interview prep?
- Main players, trends 2024 to 2026, regulation and casesLesson in Pharma, biotech and medical devices
- Mergers, acquisitions, and due diligenceLesson
- Private equity and venture capital: investor style casesLesson in The same acumen in other roles
- Consumer goods players, trends, and how to crack the casesLesson in Consumer packaged goods (FMCG)
- Organization and post-merger integrationLesson
- Stretch cases: profit to pricing, and entry to acquisitionLesson in Integrated multi-part cases
- How private equity and venture capital funds workLesson in Private equity and venture capital
- Private equity and venture capital: players, trends, regulation, and how to crack the casesLesson in Private equity and venture capital
Related terms
- SynergyExtra value created when two businesses combine.
- LBO (leveraged buyout)Buying a company mostly with borrowed money.
- Return on investment (ROI)The gain from an investment relative to its cost.
- Payback periodHow long until an investment earns back its cost.
- Time value of moneyMoney today is worth more than the same money later.
- Discount rate and hurdle rateThe rate used to turn future cash into today's value.
- Cost of capital (WACC)The return a company must earn to satisfy its lenders and owners.
- Net present value (NPV)Today's value of all future cash flows, minus the upfront investment.
Learn it in context
See Due diligence at work in a lesson from Pharma, biotech and medical devices, with checks as you go.
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