Let’s talk about the importance of Due Diligence in M&A deals.
Due diligence is the foundation of any successful M&A transaction. It is the process of investigating and evaluating a target company before a deal is finalized. DD allows the buyer an opportunity to verify the seller’s claims and uncover potential risks. For the seller, it can justify the asking price and reduce post-sale exposure.
There are several types of due diligence but here are the main ‘buckets’:
☑ Legal Due Diligence. As an M&A attorney, this is my focus. I assess the assignability of key commercial contracts, understand any business licensure requirements, and review employment agreements, corporate documents and any potential legal liabilities.
☑ Financial Due Diligence. This step involves examining the company’s financial statements, cash flow, tax records, assets and liabilities and overall financial health.
☑ Commercial Due Diligence. Here, the focus is on evaluating the company’s market position, customer base, competitive landscape and opportunities for future growth.
☑ Operational Due Diligence. Assessing the company’s day-to-day operations, including its supply chain, management team, facilities and technology, is crucial to determining both sustainability and scalability.
Don’t underestimate the power of a thorough due diligence process—it can make or break your M&A deal. If you’re buying or selling a business, we’re here to help guide you through this critical stage.
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