Legal due diligence is the process of collecting, understanding, and assessing all legal risks associated with an M&A or financing process. It involves reviewing all documents pertaining to the target company and interviewing associated people. The due diligence team normally consists of senior legal professionals, accountants, valuers, and technical experts who remain independent and unbiased. Due diligence gives the acquirer a better understanding of the target company before acquisition and helps both parties address legal compliance issues. It also allows the buyer to determine the right price to pay and analyze financial, structural, and operational aspects like human capital and intellectual property. The information obtained can help draft appropriate acquisition documents and negotiate terms based on the target company's legal obligations.

2. Due Diligence widely defined as a broad synapsis of investigative procedures in
relation to an acquisition /financing of a company’s shares or a joining joint
venture project,. Jurisprudence of due diligence is closely associated with
concept of notice which can be constructive, or implied. Legal due
diligence is the process of collecting, understanding and assessing all the
legal risks associated during Financing/M&A process. During due diligence,
the acquirer reviews all the documents pertaining to a target company and
interviews people associated with it. Normally the team consists of senior
legal professionals along with CA, Valuers and technical experts who should
be independent, neutral, unbiased, and without foregone conclusions.

3. BENEFITS Firstly, it gives the acquirer a better opportunity to
understand the target company and its operations
before acquisition. Also both investor and target companies legal
counsels meet and coordinate the diligence process which affords an
opportunity of both parties legal compliances and other
transactions.

4. Secondly,
the buyer can use the information obtained through legal due diligence to
determine the right amount to pay for the transaction. It also gives a chance
for the buyer to closely analyse the financial, structural and operational
aspects of the business including Human capital and IPR assets.
Thirdly,
the information obtained during the legal due diligence process can help both
the buyer and the target company to draft appropriate merger and
acquisition documents and other documents. It also plays a role in
negotiating the right value for both parties, based on the legal obligations of
the target company.
Fourthly where ironically it is said “knowledge is power” due diligence ensures
that there is no imbalance/inadequacy of knowledge. It also ascertains risk in
any transaction one can negotiate terms.
Finally it is a great opportunity for two corporates join together ended in single
entity which will all the time benefits investors and stakeholders apart from
improved brand image, reputation, goodwill and other value additions.

5. 3 Execution: The Execution stage will have the due diligence team collecting the
information, analysing and evaluating them, and finally sharing the results of
their analysis or evaluation, as appropriate. Also certificates from various
agencies shall be taken as a matter of record to substantiate the strengths of
the target company. Some pitfalls and obstacles may occur due to non-
availability of documents/information and the team should successfully
encounter them with possible alternatives.
*The author is senior legal professional /arbitrator with exposure in
corporate affairs/governance presently located at Danville CA USA.
Tags: Government Policy
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