What Background Check Do Companies Use?
Although private individuals have only recently started using private investigators to perform background checks, companies have been carrying out these types of checks for years. For many companies, the stakes have always been high.
The possibility of losing millions or even billions due to a simple failure to find out more about the people or entities they deal with has been enough motivation for many of them to higher private investigators who can look through every bit of available information before a business deal can be finalized.
Why Do Companies Perform Background Checks?
In most cases, companies hire private investigators to perform background checks for financial reasons. Such situations include:
- To find out if a company's valuation is factual before a merger or acquisition
- To uncover dealings in a company's past that can hurt their reputation as a business partner
- To find out if a company uses unfair tactics which your company may fall victim to
- To find out if a company has unstated intentions for entering a business deal with another company etc.
Apart from the motivations that are purely financial, many companies also must consider the legal issues that may arise if they enter into a business agreement with another company. For example, acquiring a company that is later subjected to a lawsuit can result in financial losses, sanctions and even closure of a business.
Who Performs Background Checks For Companies?
Companies use private investigators when they need background checks performed on other companies. There are investigative agencies that specialize in performing these types of investigations.
Some companies have in-house investigators that perform these types of investigations. Such investigators are usually those who specialize in fields related to finance. This is because much of the investigation will require going through financial documents.
However, there may be other private investigators with other skills who are utilized in such situations. For example, if there are criminal investigations pending against a company, there may be a need to hire a more traditional private investigator.
What Information Can Company Background Checks Reveal?
Depending on the type of dealing the companies are about to get into, there is a lot of different information that can be uncovered. Companies will perform such investigations on:
- Suppliers
- Investors
- Acquisitions
- Partners in a merger
- Competitors
- Customers etc.
Some of the information that will be of interest to the company carrying out the background information include:
- Incorrect valuation: Companies will often try to inflate their value before being acquired
- Legal issues: Companies that have committed crimes in the past or are about to be part of a lawsuit that could cost millions can be toxic to other companies
- Supply failures: Investigating a supplier will mean finding out if they've had issues delivering the required products or services in the past
- Illegal or unethical business practices: Companies and investors that have a history of unethical business practices can be a huge problem for their partners later
- Financial circumstances: Investors, partners and customers may not be honest about their financial circumstances. This can result in a company putting all its hopes on an entity that fails to come through etc.
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