Tips for a Successful Due Diligence Process in Nicaragua

By: Mónica Brenes

The due diligence process (or “Due Diligence”) is performed when you want to evaluate the compliance status of a company, in order to identify the level of risk and opportunities before signing any contract or economic agreement.

Before starting this process, it is important for the interested party to define the areas to be evaluated according to the objective to be fulfilled, since due diligence processes can be performed for some specific areas or for the entire operations of a company.

Once the scope of the project has been identified, the company interested in carrying it out must designate an adequate budget for the entire process, which goes hand in hand with the results that are expected to be achieved with the contract or economic agreement to be executed.

For this process to be successful, it is recommended to hire a multidisciplinary team made up of professionals specialized in the different areas to be evaluated and a person in charge of maintaining order and direction of the project. The interested company should also create an internal team to follow up the process with the counterparty and the team that will carry out the due diligence analysis.

Normally, the due diligence project is developed as follows:

Information gathering
Analysis of the information
Evaluation of results
Risk mitigation

For each of the stages, a specific time frame should be designated to avoid the process becoming cumbersome and time-consuming, which can be detrimental to the objective to be achieved between the parties. It is important that the scope of the analysis and the designated time frame be established according to the magnitude of the objective, since there are contracts that require more or less resources than others.

Once the process is completed, the interested company should receive an explicit report with the result of the analysis performed by the team of professionals, which identifies the compliance status of the evaluated company and determines the risks and opportunities it faces, in order to have an appropriate and valuable support for the decision to continue or not with the contract or economic agreement between the parties, or to reevaluate the offer and have a basis for a successful negotiation.