Because you want to obtain the best value possible for your investment dollar.
A thorough due diligence exercise can allow you to take a deep dive into the inner workings of a company and/or examine the validity of a new technology. Each due diligence project has its own set of issues to be addressed. They are generally related to the broad categories shown in the graphic below: technology, product design, manufacturing, quality, and supply chain
Due Diligence Process at Kevin Kennedy Associates
Useful Areas of Expertise for Technical Due Diligence
Depending on your situation, there are any number of important questions that should be answered. For the technology itself they include
- Is the technology truly needed in the market place?
- Will the technology be an improvement or have benefits that current technologies do not have?
- Does additional development work need to be done in order to ensure the technology works as intended?
- Can the technology be scaled up to a larger scale and still have the same benefits?
- Is the intellectual property associated with the technology strong enough to prevent others from easily working around the patent?
- Are there other markets for the technology?
- What is the design life and can it be designed to meet that goal?
Other questions to be answered include
- Can the product be manufactured in a cost-effective manner?
- Can they produce enough product in their current facilities to meet production goals?
- Does the team in place have the experience necessary to take the product from concept to production?
- What other basic systems or documentation needs to be in place to effectively grow the company without inefficiencies (ERP, FMEA, safety plans, etc.)?
- Should the product be redesigned or modified in order to be mass produced?
- What risks exist in placing this product in the market place?
This list is just an example of the types of issues that can and should be addressed at the time of an investment. With the right team your questions can be addressed and give you a better insight into the operations of the business you are reviewing.