What Is Due Diligence? – Meaning & Definition

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Candace Osmond

Candace Osmond studied Advanced Writing & Editing Essentials at MHC. She’s been an International and USA TODAY Bestselling Author for over a decade. And she’s worked as an Editor for several mid-sized publications. Candace has a keen eye for content editing and a high degree of expertise in Fiction.

What is due diligence? This term is primarily found in business and law books, from what I can tell. But you can also use it in general conversations when referring to a reasonable action that keeps oneself and property safe.

Keep reading to learn the definition and origin of the phrase due diligence. You’ll also learn how to use it in a sentence with the examples I provided.

Due Diligence Meaning

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Due diligence is a phrase that refers to the care that a reasonable person shows to avoid harming other people or properties. This noun describes the process of taking essential precautions to prevent an offense.

For instance, one might fail to exercise due diligence in attempting to prevent the death of a person.

We also use due diligence to refer to the research of an organization in preparing for a business transaction. You’ll encounter this term before the purchase of securities or a corporate merger.

The phrase due diligence has been used since the mid-1400s. It combines the words due and diligence. Due comes from the debere, meaning to owe. Diligence comes from the Latin word diligentia, which refers to carefulness.

Due Diligence in Law and Business

Due diligence is a broad concept in law and business. The Securities Act of 1933 made the practice common. In this law, securities dealers and brokers became liable for revealing information about what they were selling.

Equity research analysts, broker-dealers, fund managers, investors, and companies all perform due diligence.

Some types include commercial due diligence, legal due diligence, financial due diligence, and tax due diligence.

There are also two approaches to due diligence in business: hard due diligence and soft due diligence.

Is “Do Diligence” Correct?

Do diligence is a wrong phrase that many people mistakenly use because it sounds like due diligence.

Due Diligence in a Sentence

Take a look at these excerpts with the phrase due diligence.

  • Individual investors want to know we’re doing our due diligence by collecting product reviews and offering promising products for the new year. 
  • Financial records show that they did their due diligence before making the investment decision. 
  • As a startup company, we have to do our due diligence in keeping track of spending before our official product launch.
  • We did our due diligence, so we’re going to get a good return on investment.
  • Through this partnership, we will deliver an extensive transaction experience for a major servicing aggregator and its customers for pricing, committing, transferring, and due diligence of mortgage assets. (Yahoo Finance)
  • Across the globe, customers should not wait any longer for a magical one size fits all solution or ever trust that their due diligence of regulatory requirements can be delegated to any vendor. (CIO)
  • On the acquisitions side, buyers are more cautious, and we have seen a stark uptick in deals dying in due diligence. Due diligence firms like ours can move quickly, but ironically, buyers are less likely to accept compressed due diligence schedules. (Globest)
  • The UN Working Group on business and human rights have stated that legislative initiatives on due diligence ‘are critical for speeding and scaling up business respect for human rights’. (International Service for Human Rights)

Let’s Review

Due diligence should not be an intimidating phrase. This phrase simply means the action or care a reasonable person shows to avoid harming other people or properties. Unless you’re a lawyer or business person, there’s no need to dive into the details of due diligence!