Due diligence documents are those relating to a company’s assets operations, liabilities and assets. The review is usually conducted prior to a merger or acquisition or other type of business transaction and is crucial in determining the worth of the business. It also assists in understanding the risks that could arise from an acquisition by reviewing contracts, agreements, and any limitations or encumbrances to assets.
Lawyers will also review financial information, like federal and state tax returns, bank accounts, and credit reports in addition to physical assets. They will also look at the company’s contracts, employee www.medicaldataroom.com/top-8-vdr-features-every-ma-team-needs/ benefits such as payroll and organizational structure. Legal due diligence may take between 30 to 60 days. For more complex transactions the duration could be significantly longer.
Attorneys will also examine regulatory issues, including issues with compliance and antitrust analysis(opens in a new tab). They may also examine the legal landscape of the company and also any litigation that involves the company in question or its officers.
The most important part of a legal due diligence investigation is assessing the potential liability for the transaction. Attorneys typically recommend purchasing representations and warranties insurance (opens in a new tab) for the purchase. This is important, especially when the buyer is not familiar with the target company’s history. It can protect the seller from false claims or statements made by the buyer. Last but not least lawyers can look over any documentation related to the company’s policies for employees such as golden parachutes or severance packages(opens in an entirely new tab) which may be affected by changes in ownership.