What is a primary reason for conducting financial due diligence?

Conducting financial due diligence primarily aims to minimize investment risks by validating financial data. This process involves a thorough examination of the target company's financial statements, assets, liabilities, and overall financial health. By performing this due diligence, an acquiring company can identify any discrepancies or potential issues that could affect the value of the acquisition or the future performance of the business.

Validating financial data ensures that the acquiring company has a clear and accurate picture of what it is purchasing, allowing it to make informed decisions. It helps to uncover hidden liabilities, potential future cash flow issues, or accounting practices that may not be in line with industry standards. This ultimately protects the acquirer from overpaying or facing unexpected financial challenges after the acquisition is complete.

The other options, while related to various aspects of corporate operations and strategy, do not directly address the fundamental purpose of financial due diligence. For instance, increasing market share and developing marketing plans are strategic goals that could follow an acquisition, but they are not the focus during the financial due diligence phase. Assessing employee performance relates to human resources and management concerns rather than the financial aspects that due diligence primarily investigates.