Legal due diligence goes beyond kicking the tires of an automobile. It is a thorough investigation that involves lawyers and CPAs to verify documents and data. It requires the examination of a range of subject areas, such as a legal review of important contracts as well as litigation liabilities intellectual property, regulatory compliance, corporate documents, financial reviews of accounting policies and financial statements, and tax returns. It also involves a review of the organization’s management structure, and the product, service marketing, sales, facilities and equipment.
Based on the size of the deal as well as the complexity of the company depending on the size of the deal and complexity of the company, the due diligence process can be very time consuming, particularly with large public companies that have virtual piles of documents that lawyers have to sort through. Many legal departments are using technology to streamline the process. For instance a document review platform integrated with AI tools.
Set up a framework for your investigation and set a goal prior to when you begin your legal due diligence. It is beneficial to make a checklist of the areas to be addressed and to ensure that the legal team is able to agree on a plan of action with the business owner. Prioritizing areas that require professional assistance is essential. For example, a legal due diligence review of an IP holding company might include questions from an intellectual properties specialist to determine whether the company has any significant patents or other intellectual property rights, and whether there are any infringement proceedings that are pending or threatened.