AVENTURA OFFICE
18851 NE 29th Avenue
Suite 303
Aventura, FL 33180

Phone: 305-929-8500
Fax: 305-675-0564

WINTER PARK
1089 W. Morse Avenue
Suite D
Winter Park, FL 32789

Phone: 850-391-5060
Fax: 850-391-7705
TALLAHASSEE OFFICE
400 N. Meridian St.
Tallahassee, FL 32303

Phone: 850-391-5060
Fax: 850-391-7705
Kurkin Forehand Brandes - COVID-19 Update
Brand

Legal due diligence in business acquisitions

Down Arrow

You are here:

  1. Home
  2.  » 
  3. Business Law
  4.  » Legal due diligence in business acquisitions

When a company considers a business acquisition, it is important to uncover potential problems with a target company before finalizing the transaction. To accomplish this, the buyer performs several different categories of due diligence.

Financial due diligence is a significant part of information gathering, as are marketing, human resources and insurance. While legal diligence may be smaller in volume, it is one of the most critical aspects of the process.

Legal structure

In finalizing the sale of a business, the seller must show documentation detailing the company’s legal structure. This includes majority and minority shareholders, the value of shares, and the identification of corporate officers.

Litigation

No business owner wants to acquire a company only to discover it is in the midst of one or more significant lawsuits. During legal diligence, the seller must disclose any ongoing or potential litigation. The buyer’s legal counsel will review the seller’s client and vendor agreements, as well as leases, warranties and any other significant contracts.

Risk

The primary purpose of legal diligence is to gather information to help assess the risk associated with a business acquisition. It is also necessary to anticipate future legal problems because they could impact the purchase price or affect the decision to complete the transaction.

The goal of the due diligence process is to reveal as much as possible about the seller’s company. Though most sellers will be hesitant to reveal negative information about their company, it is advisable to disclose problems and get in front of them. Otherwise, an interested buyer may lose confidence in the rest of the information provided.