Due diligence documents comprise those concerning a company’s assets operating, liabilities and assets. The review is usually performed prior to a merger and is vital in determining value for the company. It can also help to identify the risks involved in a deal by reviewing agreements, contracts and limitations or encumbrances to assets.

In addition, to scrutinizing the physical assets of a target firm, lawyers often look at financial information such as state and federal tax returns, bank statements and credit reports. They will also examine the company’s payroll and employment benefits, contracts, and the organizational structure. Legal due diligence may take between 30 and 60 days. The timeframe could increase in more complex transactions.

Attorneys will also look at regulatory issues, such as compliance concerns or antitrust analyses(opens in a new tab). They might also analyze the current legal landscape of the company, which includes any litigation that involves the target company or its officers.

Analyzing the potential risk of an investment is the most important part of the legal diligence investigation. It is common for lawyers to suggest obtaining representations and warranties liability insurance(opens in a new tab) to cover the purchase. This is particularly important in the event that the buyer isn’t familiar with the www.medicaldataroom.com/top-8-vdr-features-every-ma-team-needs/ history of the company they are purchasing. It will protect the seller from inaccurate assertions or claims made by the buyer. Lastly, lawyers may also review any documentation regarding the company’s employee policies, such as severance packages and golden parachutes(opens in a new tab) which could be affected by a change in ownership.