Due diligence documents contain information that pertain to a company’s assets as well as its operations and liabilities. This review is usually performed before a merger, acquisition or other business deal and is vital in determining the value of the company. It also assists in understanding the risks involved in a deal by reviewing agreements, contracts and any restrictions or encumbrances that apply to assets.
In addition to looking at the physical assets of the target firm, lawyers often examine financial data such as state and federal tax returns as well as bank statements and credit reports. They will also review the company’s contracts, employee benefits such as payroll and organizational structure. Legal due diligence could take between 30 to 60 days. In more complex deals the duration can be extended significantly.
Attorneys also will look into regulatory issues, such as any compliance concerns or antitrust analyses(opens in a new tab). They may also look at the legal framework of the company, including any litigation that affects the company or top 8 vdr features its officers.
Assessing the potential liability of an investment is the most important element of a legal diligence investigation. Attorneys often recommend you purchase representations and warranties insurance (opens in a new tab) for the purchase. This is especially crucial when the buyer isn’t familiar with the target company and its background. It could protect the seller in the event of false representations or claims made by the buyer. Additionally, lawyers can review any documentation regarding the company’s employee policies like severance plans and golden parachutes(opens in new tab) and could be affected by a change of ownership.