The process of gathering important information (usually commercial, financial and legal information) about a company, a business or assets. Due diligence is often conducted in a number of different contexts.

On any significant proposed purchase of a business or assets (including a purchase of shares in a company), the prospective buyer (and any other parties with an interest in the transaction) will need to decide at what price and on what terms the proposed purchase represents a sound commercial investment. The purpose of due diligence, which is usually carried out by the potential buyer, is for the buyer to obtain and review sufficient information about the target business or company to form a view on those matters before committing to the purchase. The information about the target is usually made available by the seller in a data room.

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Due diligence is usually carried out in respect of any offer of securities under an offer document by a specially appointed due diligence committee.

The role of a due diligence committee is to undertake all reasonable enquiries in relation to the offer and ensure that the offer document complies with the standards of disclosure required by law and the Financial Markets Authority (FMA).