Due diligence documents comprise those concerning a company’s assets, operations and liabilities. This review is typically conducted before a merger or acquisition and is crucial to determine the value of the company. This review helps to identify potential risks by reviewing contracts and agreements as well as any restrictions or encumbrances placed on assets.
Lawyers will also examine financial information, such as federal and state tax returns, bank accounts, and credit reports, in addition to the physical assets. They also examine the company’s contracts, employee benefits and payroll, as well as the organizational structure. Legal due diligence is a procedure that can last anywhere from 30 to 60 days. The length of time may increase in more complicated transactions.
Attorneys will also examine regulatory issues, such as concerns about compliance and antitrust analysis(opens in new tab). They may also examine the legal landscape of the company and also any litigation that involves the company’s officers.
The most important element of an investigation of due diligence in law is assessing the www.medicaldataroom.com/what-is-a-data-room-and-what-are-the-different-types/ potential liability for any transaction. It is common for attorneys to recommend obtaining representations and warranties and liability insurance(opens in new tab) to protect the purchase. This is particularly crucial when a buyer is not familiar with the target company and its history. It protects the seller in the event of incorrect claims or representations made by the buyer. In addition lawyers can scrutinize any documents pertaining to the company’s employee policies like golden parachutes and severance packages(opens in new tab) that could be affected by changes in ownership.
