Due diligence is an investigation of a business or person prior to signing a contract, or an act with a certain standard of care. The theory behind due diligence holds that performing this type of investigation contributes significantly to informed decision making by enhancing the amount and quality of information available to decision makers and by ensuring that this information is systematically used to deliberate in a reflexive manner on the decision at hand and all its costs, benefits and risks. A common example of due diligence in various industries is the process through which a potential acquirer evaluates a target company or its assets for an acquisition.
Due diligence is also an analysis and risk assessment of an impending commercial transaction. It is the methodological investigation of a business or persons, or the performance of an act with a certain standard of care, to ensure that information is accurate and to uncover information that may affect the outcome of the transaction. Hence it is the process which analyses with utmost care, the compliance aspect and also the viability of the action to be undertaken.