This guide will help you understand the phrase due diligence’s meaning. You’ll also learn its origin, how to use it, examples, and more.
-
Kevin
-
January 11, 2022
-
Common Questions
Your writing, at its best
Compose bold, clear, mistake-free, writing with Grammarly's AI-powered writing assistant
You hear common phrases so often that sometimes you can go through life never truly understanding their meaning. Context clues do a lot to help us have a general knowledge of the meaning of words and phrases, but it’s fun to learn what they actually mean and how close your inferred meaning is to the real definition.
What Does Due Diligence Mean?
Due diligence is a term in the dictionary that has two meanings pertaining to two topics:
- Law
- Business
In both cases, due diligence is considered a phrasal noun. To understand these meanings, it may help to look at each word in the phrase individually.
On its own, due is defined as an adjective that refers to something expected. Due is also defined as a noun meaning that a fee or something else is owed to someone.
Diligence is a noun that means persistent, careful work. Related words for diligence would be:
- Prudence
- Conscientiousness
- Earnestness
Putting these words together, due diligence would mean carrying out a task carefully and persistently in a way that meets expectations. In some applications, that’s exactly the implied meaning.
In business, due diligence is defined as a business or organization’s research and analysis to prepare for a business transaction.
Example:
- The initial due diligence before the merger put both parties at ease.
- Be sure to perform due diligence if you plan to buy in the near future.
In law, due diligence means the care a reasonable person takes to prevent harm to another person or that person’s property.
Examples:
- The wreck could have been prevented with due diligence.
- The judge ruled in favor of the defendant because due diligence was evident.
The term is used in everyday matters of individuals. It is used typically to mean that a person should put forth an effort to guard themselves before making important decisions like a major purchase or taking out a loan.
What Is the Origin of Due Diligence?
Due diligence is a phrasal noun that has been used since the mid-fifteenth century. It has always had the intended meaning of “requisite effort” or the effort required to see something through to completion. It was only centuries later that it took on meaning for legal matters.
More recently, due diligence has taken on its meaning in the context of business. Of course, the business context is about each party’s care and preparedness efforts before a financial transaction. Here are examples of the types of financial transactions that require due diligence:
- Purchase
- Acquisitions
- Mergers
- Leases
- Employment contracts
- Distribution agreements
Due diligence often refers to taking the same actions that a prudent person or acting within a reasonable person’s conduct.
How Do You Use Due Diligence?
Due diligence can have several applications. We can use it in everyday conversation to encourage wise decisions and acting in your own best interest.
If you are thinking of buying a home, taking a new job, or using a large loan to make a purchase, others might advise you to use due diligence before making any decisions. You might hear a person affectionately say that you should “do your homework” to convey the same message.
In business, investors must use financial due diligence to assess business ventures. It’s a broad term that can refer to the process of investigation into matters such as:
- Assets
- Liens
- Inventories
Outside of investors, brokers, auditors, consultants, and others with financial business interests must use due diligence to make informed decisions. Due diligence in business involves both parties.
For example, a target company that is being purchased may be asked to provide their articles of incorporation to prove they are incorporated. Gathering legal documents and other information can lead to due diligence costs, and these may or may not be included in the numbers reflected in the financial transaction.
When companies want to embark on mergers and acquisitions (M&A), buyers are encouraged to conduct thorough due diligence to protect themselves and be assured they’re getting exactly what they think they’re buying.
In law, due diligence can either help or hurt a case depending on the particular circumstances. For example, suppose the defense can prove that a person acted with due diligence. In that case, they may be found innocent or not responsible in civil cases if another person was injured or property was damaged.
Are There Synonyms for the Phrase Due Diligence?
Synonyms are meant to express the same meaning as one word with another. Here are some of the synonyms for due diligence:
- Ordinary care (legal)
- Due care
- Analysis
- Audit
- Survey
- Investigation
- Examination
- Assessment
- Verification
Due diligence is a great way to describe processes that need to be done before you can finalize business transactions, but it is possible to be more specific and use synonyms when the word doesn’t fit quite right in a sentence.
Are There Antonyms for the Phrase Due Diligence?
Antonyms are used when you need the opposite meaning of a word. For due diligence, here are some antonym examples:
- Carelessness
- Disregard
- Indolence
- Lethargy
- Inattentive
Examples of Due Diligence
- The buyer and the seller must do their due diligence for a successful sale.
- All due diligence processes must be completed by the deadline for this merger.
- The court ruled that due diligence was not taken when you did not secure the gate to the pool at night.
- Lawyers will argue a lack of due diligence led to the fatal accident.
- Obeying the proposed zipper strategy in the car line is a kind of due diligence that protects students, parents, and teachers from harm.
- We ask that employees practice due diligence for the safety of themselves and others.
- Instituting due diligence policies now can save you from potential lawsuits later.
Thankfully, you’ve done your due diligence today in researching the meaning of this commonly used phrase!
Sources:
