due diligence

noun

Definition of due diligence

1 law : the care that a reasonable person exercises to avoid harm to other persons or their property failed to exercise due diligence in trying to prevent the accident

2 business : research and analysis of a company or organization done in preparation for a business transaction (such as a corporate merger or purchase of securities)

Doing Your Due Diligence More Example Sentences Learn More about due diligence

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Doing Your Due Diligence

Due diligence has been used since at least the mid-fifteenth century in the literal sense “requisite effort.” Centuries later, the phrase developed a legal meaning, namely, “the care that a reasonable person takes to avoid harm to other persons or their property”; in this sense, it is synonymous with another legal term, ordinary care. More recently, due diligence has extended its reach into business contexts, signifying the research a company performs before engaging in a financial transaction. This meaning may also apply to individuals: people are often advised to perform their due diligence before buying a house, signing a loan, or making any important purchase.

Examples of due diligence in a Sentence

Recent Examples on the Web

Council had the forensic audit conducted in order to do its due diligence in assuring residents and itself that no money was missing from the city’s accounts. — cleveland.com, "Audit of former Highland Heights mayor Coleman’s city dealings finds no wrongdoings," 14 June 2019 Save Our Heritage Organisation and its attorneys had argued the city did not do its due diligence in originally approving the project by not considering other options for the building, as required by the California Environmental Quality Act. — San Diego Union-Tribune, "Settlement reached in California Theatre dispute," 11 June 2019 Yet the apparent lack of due diligence by Novartis underscores a disturbing pattern in which the company has repeatedly run into trouble by haphazardly tossing around money to win friends and boost business. — Ed Silverman, STAT, "Novartis’ tone-deaf response to Michael Cohen: troubling, but not surprising," 14 May 2018 Barely more than one year later, the multi-billion-dollar Ponzi scheme run by Bernard L. Madoff unraveled, catching many such investors by surprise—and teaching them that due diligence should never go undone. — Jason Zweig, WSJ, "Wall Street Has It Wrong. You’re a Smart Investor.," 22 Feb. 2019 Sinatra said she was told by one of FBT’s partners that there were only two other owners and that both had clean records, and has said the company performed due diligence on them. — Neil Weinberg, Bloomberg.com, "How Wynn’s Boston Casino Is Rising on Land Tied to a Mobster," 11 Apr. 2018 The due diligence process usually takes about 30 days. — Kevin Brass, New York Times, "House Hunting in ... Costa Rica," 4 July 2018 Verhoeven walked Kalanick through various exhibits, ultimately driving to the point that the former CEO was unaware of some key details, including the fact that a due diligence report had not yet been completed. — Cyrus Farivar, Ars Technica, "Uber’s ex-CEO: At first, Uber considered Google to be its “big brother”," 7 Feb. 2018 Meanwhile, Levandowski files a motion requesting that details of the due diligence report referencing those confidential files not be included in the lawsuit. — Kirsten Korosec, Fortune, "Waymo V. Uber: What You Need To Know About the High-Stakes Self-Driving Tech Trial," 5 Feb. 2018

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'due diligence.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

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Last Updated

19 Jun 2019

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The first known use of due diligence was in 1598

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More Definitions for due diligence

due diligence

noun

Financial Definition of due diligence

What It Is

Due diligence is the careful, thorough evaluation of a potential investment, whether on a corporate or individual level.

How It Works

For individual investors, due diligence often means studying annual reports, SEC filings, and any other relevant information about a company and its securities. The objective is to verify the material facts related to the purchase of the investment, as well as to understand whether the investment fits an individuals return requirements, risk tolerance, income needs, and asset allocation goals.

An individual's due diligence might include reading the company’s last two or three annual reports, several recent 10-Qs, and any independent research they could find. In doing so, they would develop a sense of where Company XYZ is headed, what market factors might affect the stock’s price, and how volatile the stock is. This in turn might give them guidance about whether the investment is right for you, and if so, the size and timing of their investment.

In a merger scenario, due diligence often involves a team of people specially tasked with reviewing and verifying every aspect of an investment in another company. In many cases, this team might include lawyers, accountants, and investment bankers.

Why It Matters

Due diligence helps people and companies understand the nature of an investment, the risks of an investment, and how (or whether) an investment fits into a particular portfolio. Due diligence isn’t just good sense, it’s a duty investors owe to themselves -- doing this sort of "homework" on a potential investment is often essential to making prudent investment decisions.

Source: Investing Answers

due diligence

noun

Legal Definition of due diligence

1 : such diligence as a reasonable person under the same circumstances would use : use of reasonable but not necessarily exhaustive efforts

— called also reasonable diligence

Note: Due diligence is used most often in connection with the performance of a professional or fiduciary duty, or with regard to proceeding with a court action. Due care is used more often in connection with general tort actions.

2a : the care that a prudent person might be expected to exercise in the examination and evaluation of risks affecting a business transaction

b : the process of investigation carried on usually by a disinterested third party (as an accounting or law firm) on behalf of a party contemplating a business transaction (as a corporate acquisition or merger, loan of finances, or especially purchase of securities) for the purpose of providing information with which to evaluate the advantages and risks involved the greatest exposure…for failure to conduct adequate due diligence arises in the context of public offerings of securities— G. M. Lawrence

c : the defense (as to a lawsuit) that due diligence was conducted