The term "due diligence" first came into common use as a result of the United States' Securities Act of 1933 which included a certain defence for broker-dealers referred to as the "Due Diligence" defence.
Broker-dealers accused of inadequate disclosure to investors of material information with respect to the purchase of securities would not be held liable for nondisclosure of information if they had exercised "due diligence" in their investigation into the company whose equity they were selling, and disclosed to the investor what they found. Over time the term “due diligence” has been adopted to be used in other situations and are now commonly used as a description of more or less any systematically investigations into a company.
At Aabø-Evensen & Co we take pride in keeping a special focus on the due diligence-process. We strongly believe that the due diligence should be handled by a team of experienced lawyers with a good knowledge of the sector in which the target operate. We do not believe “a standard” due diligence normally is in the client’s best interest. In most cases the due diligence should be customized to the planned transaction both in respect of risk factors and materiality and format.
We believe that the due diligence process overall should represent a cost saving act for the client, preventing unpleasant and costly surprises and/or reduce the purchase price.