Due diligence documents include those related to a company’s assets operating, liabilities and assets. The review is usually performed prior to a merger or acquisition and is vital in determining the value of the business. It can also help to identify the potential risks associated with the course of a deal by reviewing contracts, agreements and any encumbrances or restrictions on assets.
Lawyers will also scrutinize financial data, including federal and state tax returns, bank accounts and www.medicaldataroom.com/how-to-prepare-your-legal-documents-for-due-diligence/ credit reports in addition to physical assets. They will also review the company’s payroll, employee benefits, contracts, and the organizational structure. Legal due diligence is a procedure which can take anywhere from 30 to 60 days. In more complex transactions the amount of time can increase dramatically.
Attorneys will also look at regulatory issues, including any compliance concerns or antitrust analyses(opens in a new tab). They might also analyze the legal landscape of the company, which includes any litigation involving the company in question or its officers.
Examining the risk of a transaction is the most important aspect of a legal diligence investigation. It is typical for attorneys to recommend obtaining representations and warranties insurance. insurance(opens in new tab) to cover the purchase. This is particularly crucial when a buyer is not familiar with the company of interest and its background. It could protect the seller in the event of incorrect claims or representations made by the buyer. Lastly, lawyers may also examine any documentation of the policies of the company’s employees, such as severance packages and golden parachutes(opens in new tab) which could be affected by a change of ownership.
