Due Diligence Out

Term Main definition
Due Diligence Out

A term or provision in a definitive agreement that allows an investor, acquiror, or similar party the right to terminate the agreement before the consummation of the transaction if the party is dissatisfied with the results of Its due diligence investigation. Similar terms and provisions include a material adverse change provision.  A due diligence out, if not narrowly written, creates an option on the party of the investor or acquiror to back out.  For this reason, experienced entrepreneurs use the word "option" to refer to an agreement which includes a due diligence out.