Business Purchase Sale
Orange County Business Purchase and Sale Attorneys
Phase One: Due Diligence
Due diligence is the first phase of any contemplated business sale or acquisition. It is the formal process by which each party examines the ability of the other party to deliver on what was promised, and to create protective firewalls to prevent surprises, to either side, once the deal is done. Like looking under the hood, reviewing the warranty, and determining the finance terms for purchase of a used car, corporate due diligence is probably the most critical phase in determining if the deal makes sense. Not surprisingly, it requires a considerable expenditure of time and analysis on the part of both parties’ legal teams, as well financial and technical personnel.
In some instances, VLF handles all of legal due diligence for one side of the transaction. In others, VLF is brought in by another law firm or the company ownership or management team, in which case our attorneys work directly with the company’s General Counsel or outside counsel to evaluate the acquisition. Although due diligence is typically an extensive process, it allows us to learn what our clients truly seek to accomplish by the deal, and to counsel our clients on potential benefits and synergies versus the potential risks and exposure of consummating the deal with the other side.
On the buy side,
Likewise, on the sale side,
VLF’s due diligence representation lets the seller not only meet its disclosure obligations, but also determine the buyer’s willingness and ability to perform. This means not only making clear and meaningful disclosures to expedite buyer’s due diligence, but also conducting a reverse due diligence on the potential purchasers and structuring the deal accordingly. In a competitive market space, the seller needs protection against the possibility of a purchaser who is using the process merely to gain insider information about the market or even trade secrets that the seller may have developed. In this scenario, VLF would identify a need for the non-disclosure to contain appropriate remedies for misuse of shared information, and for final documents to allow for the potential re-acquisition of the business on favorable terms if the purchaser does not live up to their promises.
Sometimes deals founder during due diligence because one party does not want to share key information, or because a party discovers a nasty skeleton in the closet about which it did not previously know. Other times due diligence provides the parties with meaningful information to intelligently renegotiate the deal. Either way, proper due diligence is what lets business decision-makers reduce the chance of an unexpected lawsuit.
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