Due diligence is a process of investigation and evaluation performed by a business or individual before entering into a financial transaction. It typically involves examining the company’s financial records, interviewing management, confirming information provided by the seller, and assessing the potential risks associated with the transaction. The purpose of due diligence is to ensure that all relevant facts have been considered prior to making a decision and any potential liabilities or risks are taken into account. When done right, it can help protect the buyer against financial losses, overpayment for assets, and legal action.