Due Diligence

A legal diligence review is conducted in order to (1) discover hidden liabilities of the target business or other problems with the transaction, (2) learn about the target business in general, (3) prepare acquisition documents, and (4) minimize the potential of future litigation by helping the seller disclose all appropriate materials. Adequate due diligence should be conducted prior to completion of all transactions, but is especially crucial in stock transactions where liabilities follow the stock being purchased. Often the due diligence process unearths minor irregularities that must be cleared up prior to closing. True deal-killing issues arise less often. If is often necessary to decide if a buyer can live with a minor legal irregularity.