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

The letter said Goldman had done due diligence on Mr. Low and found no issues. — Nicole Hong, WSJ, "Former Goldman Banker Is in Plea Talks Over Malaysian 1MDB Scandal," 9 July 2018 Christopher Cook, a director for the Michigan Economic Development Corp., which administers programs and performs due diligence on behalf of the strategic fund, said the cemetery deal is still far from being finalized. — J.c. Reindl, Detroit Free Press, "Michigan fund backs questionable bid for scandal-plagued cemeteries," 4 July 2018 Its website advertises its corporate work, such as performing due diligence on clients' competitors or acquisition targets. — Richard Engel, NBC News, "Black Cube: Inside the shadowy Israeli firm accused of trying to undermine the Iran deal," 25 May 2018 Endpoint Solutions, Franklin, hired Brian Roper as a senior compliance specialist and added Tim Hanson to the due diligence/subsurface staff. — Milwaukee Journal Sentinel, "New hires, promotions at Wisconsin companies," 28 June 2018 The city, just as all parties, is being very responsible in their due diligence and seeking appropriate information in considering their support of the project. — Erin Edgemon, AL.com, "Should the city of Birmingham help pay for new downtown stadium?," 30 Jan. 2018 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

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

6 Nov 2018

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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