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Our cannabis team has performed due diligence on countless business purchases, investments, loans, and just about every other kind of transaction you can imagine. As you can imagine, we’ve seen some pretty bad and even sketchy things over the years. With rescheduling on the horizon (see here and here), we expect to see an increase in loans, investments, and other transactions. And so we thought it might be time to look at five of the biggest due diligence red flags.
#1 No cooperation in due diligence
Hands down, the biggest red flag in due diligence is when the seller, borrower, etc. refuses to participate in the process. I don’t mean getting fatigue when the buyer or investor’s lawyers ask too many questions – I mean refusing to participate in the basic process. We’ve seen people refuse to provide basic information. Or walk away from a deal when basic questions were asked. Or say that other people did similar deals without information, so you should too.
This is all incredibly suspect behavior. Someone who is selling a business or seeking a loan or investment needs to be completely open. Obviously, diligence periods can get off the rails
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