Due Diligence

What is Due Diligence in Law?

The key to a successful acquisition is the exercise of due diligence. If you have decided to acquire a business, as a buyer, you will want to ensure that the acquisition will be successful, especially when considering the long-term integration of the new business.

For any significant acquisition, the buyer must ensure that the seller and the target company have good title to the assets brought and should know the full extent of any liabilities that could potentially occur.

Due diligence is the process by which a buyer of or an investor in a company, asset or business investigates the records of the target to support its value and find out whether there are matters on which it requires further information or which it should use as a platform to renegotiate the price.

What should I do as a Buyer regarding Due Diligence?

As a buyer, you should research your target and find the answers to many important questions, like why is the entity for sale and whether or not it is still profitable. You should identify the potential issues that may arise like employee claims, financial matters or undisclosed assets. Buyers can often underestimate the importance and demands of this part of the due diligence process. As a buyer, you will need a thorough outline of evidence to judge the integrity of the intended purchase.

What should I do as a Seller regarding Due Diligence?

As a seller, you would need to speak to a professional to assist you in responding to the enquiries made by the buyer. There must be clear guidance on the full, and frank disclosures about specific issues. You may face an overwhelming stream of questions and would have to deal with them as accurately as possible to the best standards when identifying particular issues.

The enquiries form the basis of the disclosure letter, so having professional advice will aid you in the negotiation process and help protect your interests.

The corporate specialists at Leon Kaye have a wide-ranging history of assisting both buyers and sellers with their due diligence procedures. We will aid you in securing the outcome that you desire. To speak with one of our team, please call us on Chelsea 0207 228 2020, Knightsbridge 0207 095 0930 or email us at info@leonkaye.co.uk.