due diligence


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)

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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

Our due diligence' During the conference call with reporters, Meekins said the Department of Health and Human Services was working to comply with the court order But the agency's main priority was ensuring the safety of the children. Daniel González, azcentral, "Feds say 34 immigrant children to be reunited with parents; no timetable for others," 10 July 2018 LyondellBasell has been negotiating with Odebrecht to buy Braskem, but until now had not been allowed to perform due diligence, which is often a precursor to a merger agreement, according to people familiar with the matter. Dana Mattioli, WSJ, "LyondellBasell, Braskem Confirm Merger Talks," 15 June 2018 As a matter of due diligence, Finley suggested that the IceCube team go back through their old data to examine whether any other neutrinos had come from the same direction. Author: Sarah Kaplan, Anchorage Daily News, "In a cosmic first, scientists detect ‘ghost particles’ from a distant galaxy," 12 July 2018 Vlade Divac did his due diligence on Doncic—and there was some level of suspicion around the league that Sacramento could still change their mind at the last second—but ultimately Bagley was the choice. Jeremy Woo, SI.com, "Explaining the Biggest Surprises of the 2018 NBA Draft," 22 June 2018 One last bit of advice for finding a side hustle: do your due diligence. Kat Hnatyshyn, kansascity, "The secret to finding a good side hustle," 12 July 2018 Part of a bigger vision’ Scott, Weinberg and a few other executives did their due diligence. Sam Donnellon, Philly.com, "As Philadelphia changes, Wells Fargo Center tries to change with it," 7 June 2018 There was this fear of missing out that explains a lot of Walgreens’ sort of credulity and lack of due diligence. Recode Staff, Recode, "Full transcript: WSJ investigative journalist John Carreyrou on Recode Decode," 3 June 2018 For the most part, under Roberts’ watch, the MHSAA hasn’t done its due diligence to make sure athletes actually changed residences. Mick Mccabe, Detroit Free Press, "MHSAA's Jack Roberts announces retirement after 32 years as exec director," 24 Apr. 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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First Known Use of due diligence

1598, in the meaning defined at sense 1

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Statistics for due diligence

Last Updated

28 Aug 2018

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Time Traveler for due diligence

The first known use of due diligence was in 1598

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due diligence


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


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

More from Merriam-Webster on due diligence

Britannica English: Translation of due diligence for Arabic Speakers

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