Pictured above: Malcolm Cook

Due diligence is arguably proving even more important in the tough times than in the good, according to a deals specialist.

Malcolm Cook, corporate finance partner in the Birmingham office of accountants and business advisers PKF, said he had even seen deals called off on the basis of the due diligence, which proved it was serving its purpose.

The overall demand for due diligence had not risen because there were fewer transactions around, but arguably it had become more crucial.

Mr Cook said: "Due diligence is about ensuring you are paying the right price for a business and making sure you get what you think you are getting.

"The big challenge in the last year has been the variable and volatile trade performance from businesses. That has made forecasting difficult.

"It has also made it difficult to assess whether customers can pay and suppliers will still be there to supply the business."

Other issues included pensions, exchange rates and the impact of bank tightening.

Unless a business was being bought out of administration or the target was a publicly quoted company, due diligence can and should be undertaken and trying to do you own due diligence was not a good idea, cautioned Mr Cook.

Far better to get a proper job from an external, independent, source.

"In most cases you have to question whether an organisation has the time or expertise to do it themselves.

"The due diligence we are being asked to take on is much more highly focused - indeed as a result of some of our work we have seen transactions go uncompleted, which shows that it is serving its purpose."

One successful deal where PKF did the due diligence was in the case of online games developer Monumental Games raising £2 million from the Government's Capital for Enterprise (CfE) fund.

The money was invested by venture capitalist Maven Capital Partners on CfE's behalf and will be used to develop Monumental's technology, which is used to create 'massively multiplayer' web-based games.

Nottingham-based Monumental Games has built its business from start-up to sales of £6 million in less than five years.

PKF also did the due diligence when Wolverhampton-based engineering services group Deritend similarly raised £2 million for investment via CfE.

Deritend has a £25 million turnover and employs around 200 people.