Ownership and transitions
Due diligence
The buyer's review of a practice's records, contracts and finances before closing a purchase, to confirm what is being bought.
Due diligence is the careful review a buyer does before closing a deal. Cornell's legal reference defines the term as the level of reasonable care or attention expected to avoid liability, especially in legal and financial matters.
In a practice acquisition, buyers often review financial statements, tax returns, contracts, leases and patient and staff records. The SBA's guide to buying an existing business sums up the point this way: do your due diligence.
A review of documents is not the same as a practice valuation, which estimates worth. The scope of a review depends on the deal. Buyers should ask an attorney, a CPA and a lender what to check. This entry is a general definition only.