When an acquisition or investment is contemplated, a legal due diligence of the target entity is conducted by the proposed buyer to learn about any legal risks that prevail in the target entity. This helps in making an informed investment decision.
The various facets covered in a Legal DD report are:
- Compliance of various acts and rules (Example, Companies Act and Labour Laws)
- Pending litigations
- Verification of important information
- Additional background checks of promoters and management, if required
- Analysis of contractual terms, if required
A Legal DD is part of the two larger goals in a transaction: one, determining the purchase consideration, and two, drafting meticulous definitive agreements. Both of which we can do as well.