The investigative process that is carried out as part of a business acquisition, or potential acquisition, is known as due diligence. It normally also goes ahead if a part investment is being made. Due diligence will establish material facts in relation to the potential acquisition with a view to reducing risks, or identifying areas which may be risky and require further attention. As such, the process is a cornerstone of any business acquisition and it's essential that experienced solicitors for due diligence are on hand to oversee it.
All aspects of business are necessarily covered by the scope of due diligence, including:
Solicitors for due diligence from Oratto
Oratto is an online platform, developed to allow easy and swift access to high end lawyers for those who require legal services. Having a competent and knowledgeable solicitor to handle the due diligence process in your business acquisition is absolutely essential. There are so many elements which go into reducing risks with a business purchase that an experienced commercial lawyer should be overseeing the process from the start.
All solicitors on this page are experts in advising on the complex processes required for due diligence. You can select a lawyer from the list or send your details through to Oratto and we will find the best solicitor for your needs using our Oratto Match function.
When is it necessary?
Amongst others, due diligence is carried out as part of the flotation process, involving public procurement. It culminates with the IPO (Initial Public Offering) being offered for sale on a public investment exchange. IPO refers to previously privately held stock which is now up for sale.
In other acquisitions, there may be slight variations depending upon the parties involved and the type of business being acquired, but the underpinning for due diligence processes remain the same.
Due diligence process
There are many different aspects of successful due diligence; assessing legal, regulatory and financial exposure is key. It's an extremely important and precarious process which requires not only expertise, but also a strong element of project management. For example, questions should not be asked of the target company more than once, which may be a risk if there are different parties working together on the process. Your chosen solicitor will be able to oversee the due diligence procedure and manage any risks involved.
Typically, the investor, or purchaser, will typically sign a confidentiality agreement (non-disclosure agreement) and then prepare a list of questions for the target company to answer. The responses given to these questions are extremely important and will go some way towards creating a basis for an ultimate decision. Amongst other things, they will affect indemnities and warranties in the share purchase agreement in terms of both the structure and the extent. The rule of thumb is that the earlier responses to the questions are received, the better. Your Oratto member due diligence lawyer will be able to ensure that questions are answered in a timely manner.
During this process, sight of a number of key documents will be required. These include:
- recent tax returns and bank statements
- business plans
- Articles of Association and Memorandum
- employment contracts
- licensing agreements
- property lease agreements
- IP issues (trademarks and patents)
- actuarial valuation reports
- details of pension schemes
- any ongoing litigation or contentious issues
- insurance details
- environmental reports
Acquisition and investment situations are complex and careful handling is needed in terms of legal due diligence and managing the process. It results in complete transparency for potential investors. If there is any information disclosed subsequent to going public, then the company will be liable for this. As such, due diligence is a legal requirement.
Contact Oratto today to speak to a commercial solicitor for advice and guidance on any aspect of the due diligence process.