Due diligence is the process of investigation and analysis that a company or individual conducts prior into any kind of transaction, for example, investing in a business. This type of investigation is typically required by law for companies looking to buy other assets or businesses and also by brokers who wish to ensure that the client is fully informed of the specifics of a transaction before committing to it.

Investors typically conduct due diligence when evaluating potential investments, that could include a corporate acquisition, merger or divestiture. The process can reveal hidden liabilities, such as outstanding debts and legal disputes that can only be made public after the fact. This could impact the decision to conclude a deal.

There are a variety of due diligence. These include commercial, financial and tax due diligence. Commercial due diligence is focused on a company's supply chain and market analysis, as well its growth prospects and a financial diligence analysis looks at the company's financial records to be sure there aren't any accounting errors and is financially sound. Tax due diligence analyzes the tax exposure of a company and determines if there are any outstanding tax.

Due diligence is often limited to a time frame also known as a due diligence period, in which a buyer could evaluate a purchase and ask any questions. Based on the type of deal, a buyer could require specialist involvement to perform this research. For example, an environmental due diligence could consist of the list of environmental permits and licenses the company has, whereas financial due diligence could involve a review by certified public accountants.