A legal due diligence is more than just running the tires of an automobile. It is a thorough investigation that includes lawyers and CPAs who verify documents as well as facts. It requires the review of a broad range of focus areas, including an analysis of legality of contracts and litigation liabilities intellectual property, regulatory compliance, corporate records, financial reviews of financial statements and accounting policies and tax returns. It also includes an operational review of the business’s management structures, organizational structure, products, services, sales marketing, facilities and equipment, supply chain, customer relationships and distribution channels, and competition.
Legal due diligence can be a lengthy process, depending on the extent of the company’s operations and the magnitude of the transaction. This is especially relevant for large public businesses that have virtual piles documents that lawyers have to sort through. As a result, many legal departments are beginning to use technology to streamline and speed up the process, such as an online platform for document review that is integrated with AI tools.
Before starting the legal due diligence process, establish an outline and a goal for the investigation. It is beneficial to create a https://medicaldataroom.com/what-is-a-data-room-and-what-are-the-different-types/ checklist with key areas to be covered and to have the legal team agree on a plan of action with the business owner. It is also crucial to determine which areas require special expertise from the firm. A legal due diligence review on an IP holding company, for instance could include questions from an intellectual property specialist to determine whether the company has any important patents or other intellectual-property rights and whether there are any infringement lawsuits currently in the process or imminent.
