Due Diligence On Mergers & Acquisitions

There are many areas that will require due diligence when proceeding with a merger or acquisition. While some clients prefer to be very hands-on and involved, it’s important for an attorney to also be as involved as possible. This is to ensure that due diligence is done and that everything is in compliance with the law.

A business must be in compliance with all applicable laws. This includes…

• State law,
• Federal law,
• Regulations,
• OSHA,
• Tax law, and
• Others.

A business must also be compliant with its contractual obligations to other parties, meeting customer needs, and with collecting all revenues. We need to know if they are running the business normally and consistently over the past few years, or if there’s been a drop-off. We also need to know whether or not there are any issues with the current management.

One must do due diligence in all areas, including looking into whether or not the customers are connected with the principles. If customers are connected to the individuals who are selling, you need to understand how top customers are connected to the owners. If the current owners sell, will the top customers leave and therefore cause a loss of revenue for the business?

Due diligence is doing a full audit of the business to determine if buying, acquiring, or merging that business is going to be in your best interest.

As the selling company, you’re going to be in a scenario where you want to be as transparent as you possibly can be with certain exceptions pertaining to assets. You will want to have a non-disclosure confidentiality provision signed by whoever is looking into your business. This is to protect sensitive information from being used by a party, later on, should the deal not progress.

The whole purpose of the confidentiality and disclosure agreement is to prevent a party from coming in and obtaining sensitive business information as a course of their own due diligence, claiming that they’re no longer interested, only to then use that information to damage the business.

If you’re seeking to acquire, you are definitely going to need to do a deep dive into the business. You need to know how the business operates, how it ticks, and every single aspect of its functionality and operation.

Due diligence is not typically open-ended. You are usually given somewhere between two weeks to a month to conduct your due diligence. This means that you need to have boots on the ground and be there doing a major review. You’re not only going to necessarily hire an attorney, but also an accountant or a CPA. You’re going to hire bankers in terms of financing, insurance people, and other individuals that will make up a full team of experts who will help you determine if this is a deal worth pursuing or if it’s even possible.

Of course, the number of people you hire will be contingent on how big the acquisition is going to be. When it comes to due diligence, there are a lot of different areas that you’re going to handle. It’s effectively an audit into how the business functions and how it would be impacted by the acquisition.

What Might Be Some Other Advisors Who Are Important To Consult In These Beginning Stages?

In the beginning stages of a merger or acquisition, you may want to consider hiring expert advisors to ensure you are making the best possible decision for yourself and your business. These may include…

• An attorney,
• An accountant,
• A CPA,
• An insurance agent, and
• A banker.

For more information on Due Diligence On Mergers & Acquisitions in FL, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (786) 788-8756 today.