A Business Colonoscopy
The due diligence process in an M&A transaction involves a legal, financial, and operational review of all the seller’s documents, including contractual relationships, operating history, and organizational structure. Due diligence is a process and a test of the value proposition underlying the transaction to ensure that the seller’s company meets the expectations created before the signing of the Letter of Intent.
Due diligence begins with a standard comprehensive due diligence checklist; however, sellers should expect any perceived risks identified by the buyer to be investigated thoroughly with several follow-up checklist in tow.
Due diligence work is divided between two efforts:
- Financial and operational due diligence – confirmation of past financial performance; synergies and economies of scale to be achieved; integration of the human and financial resources of the two companies; and collection of information necessary for financing the transaction.
- Legal due diligence – legal issues and problems that may serve as impediments to the transaction; the transaction structure; and the contents of the transaction documents, representations and warranties.
An experienced M&A Team understands the invasive nature of due diligence and can assist sellers throughout the process.