I was thinking; “Did you plan to lose £60,000?” as a developer friend of mine told me how much their now ex-builder had disappeared with. Had they spent an hour on due diligence, chances are they’d still have that £60,000 (what other activity will pay you at a rate of £60,000 per hour?).
Investors put effort, time and resources into building up wealth, but then spend little of the same into protecting said wealth. It appears to be a truism that one should “do your due diligence”, but then little is said of “how” to do this. The following is a guide on the “how” to find lots of data “hiding in plain sight” for free, or very low cost.
This can be applied to the following circumstances, as there is a high degree of overlap:
- Potential Investors/ JV partners (particularly for FCA 13/3 Compliance)
- Vendors selling land, properties and/or ‘deals’
- Trades employed on your behalf that you are responsible for unless there has been proper delegation of roles.
Goals of Due Diligence
Due Diligence is about confirming that representations being made are correct (whether they be people, projects and/or deals). It is about figuring out the true position, and hidden information that would materially impact upon the interaction, or a Nassim Taleb’s “Black Swan”. The following are data sources and some details to be on the lookout for. Single points of data by themselves may not be terribly interesting, but when data is combined from multiple sources, a ‘story’ starts to emerge.
Land registry contains title deeds showing ownership, associated addresses, charges and restrictions. For £3.00, you can see if the property is encumbered, if/which bank has an interest in the property, strange restrictions (references to the court can sometimes imply divorce/administration), second charges etc. Dates within the title will show when various activity happened and partially describe a history of the property/owner.