As businesses grow in size and value, the importance of conducting a due diligence background check related to new partnerships, key transactions and senior-level personnel grows, too.
At CS Business Screen, our clients often choose to conduct a due diligence background check when:
- They are considering a major investment
- They are choosing an important vendor
- They are merging with or acquiring another company
- They are taking on a significant new client
- They are hiring a senior executive
It’s easy to understand the motivation behind a due diligence background check. Any company and any business owner would want to know as much as possible about individuals and entities that will be important to operations moving forward. But what does a due diligence background check reveal?
Here’s a look at what you find from conducting a due diligence background check, as well as hit rate statistics drawn from our own experience.
The Types of Records Found in Our Reports
Due diligence background checks are performed on both individuals and entities. For example, if your business were considering a major acquisition, it could conduct due diligence background checks on both the owner of the other company and the other company itself.
- Types of records found in our reports
- Criminal Convictions
- Civil Litigation
- Pending Judgments and Liens
- Enforcement Actions/ Government Sanctions
- Regulatory Violations
- Federal / State Debarment
- Types of cases identified through due diligence
- Breach of Contract Cases
- Order of Class Action Suit Settlements
- Frauds & Swindles
- Tax Evasion
- Mail Fraud
- Mortgage Fraud
- Violations of the Civil Rights Act
- Collections of Debt
- Personal Injury
- Wrongful Termination
- Wrongful Death
- Malpractice Cases
- Trademark Violations
Of course, the information included in these records would be material to any company considering a merger or acquisition, a major investment or a key relationship with an individual or entity.
The Hit Rate From Our System
How often do we find something when conducting a due diligence background check? Here are the statistics, broken down by individuals and companies:
- 20% of individuals we conducted a due diligence background check on had a record
- 15% of companies we conducted a due diligence background check on had a record
To put this into context, imagine your company is considering the acquisition of a start-up competitor. You choose to conduct a due diligence background check on both the founder of the company and the company itself.
There’s a 20% chance (about 1 in 5) that you’ll discover a record from the list above related to the founder. That’s like rolling a die. And there’s an 15% chance (about 1 in 6) that you’ll discover a record from the list above related to the company.
For most owners, executives and companies, those statistics and odds are enough to compel them to move forward with a due diligence background check.
The Dangers of Not Performing a Comprehensive Due Diligence Background Check
Not every company chooses to conduct a due diligence background check during key transactions and decisions. Those companies expose themselves to a series of risks and dangers, including:
- Liability: Failure to run a due diligence background check could expose a company to significant liability.
- Regulatory and Compliance Issues: Failure to run a due diligence background check could put a company into the government’s crosshairs over regulatory and compliance issues.
- Financial Loss: Failure to run a due diligence background check could lead to serious financial losses.
- Reputation: Failure to run a due diligence background check could create damage to a company’s reputation.
There are other risks and dangers in not running a due diligence background check, but the ones listed above are the most common.
What Information Should Make You Take Action?
Not every record that might emerge from a due diligence background check should thwart a deal or partnership. Think of a background check as simply gathering comprehensive information. When your company is about to make a serious investment or enter a key partnership, why wouldn’t it want as much information as possible before making a decision?
The due diligence background check records that should make you take action are the ones that can result in the risks or dangers listed above. If a background check uncovers something that could lead to liability, regulatory or compliance issues, financial loss or damage to your reputation, action is needed.
Get a Comprehensive Due Diligence Background Check
At CS Business Screen, we work with companies and organizations that find themselves at a pivotal moment: considering a merger or acquisition, evaluating a new investment, selecting a major vendor, or entering a key partnership. They choose CS Business Screen because we quickly return the actionable information they need. When you work with us, you can count on:
- Accuracy: We offer people and tools that research at the source to secure the most accurate information possible.
- Clarity: We present information that is clear, so that you can quickly analyze it and make confident decisions.
- Ease of Use: We make available an easy-to-use interface where you can order or manage background checks and even retrieve alerts.