A common example of due diligence is the process through which a potential acquirer evaluates a target company or its assets in advance of a merger or acquisition.
Originally the term was limited to public offerings of equity investments, but over time it has become associated with investigations of private mergers and acquisitions (M&A) as well.
Due Diligence has emerged as a separate profession for accounting and auditing experts and is typically referred to as Transaction Services.
[further explanation needed] With the number and size of penalties increasing, the United States' Foreign Corrupt Practices Act (FCPA) has caused many U.S. institutions to look into how they evaluate all of their relationships overseas.
Due diligence in regard to FCPA compliance is required in two aspects: In the M&A context, buyers can use the due diligence phase to integrate a target into their internal FCPA controls, focusing initial efforts on necessary revisions to the target's business activities with a high-risk of corruption.
[16] Passed on May 25, 2011, the OECD member countries agreed to revise their guidelines promoting tougher standards of corporate behavior, including human rights.
As part of this new definition, they utilized a new aspect of due diligence that requires a corporation to investigate third party partners for potential abuse of human rights.
[18] Due diligence in civil procedure is the idea that reasonable investigation is necessary before certain kinds of relief are requested.
Due diligence is also generally prerequisite to a request for relief in states where civil litigants are permitted to conduct pre-litigation discovery of facts necessary to determine whether or not a party has a factual basis for a cause of action.
[citation needed] In criminal law, "due diligence" also identifies the standard a prosecuting entity must satisfy in pursuing an action against a defendant, especially with regard to the provision of the Federal and State Constitutional and statutory right to a speedy trial or to have a warrant or detainer served in an action.
In cases where a defendant is in any type of custodial situation where their freedom is constrained, it is solely the prosecuting entity's duty to ensure the provision of such rights and present the citizen before the court with jurisdiction.