My best practices for an effective legal due diligence. Here my tips to speed-up the process, be cost-efficient and expand the investigation beyond the due diligence documents provided by the target company.

1. Ask clients about priorities. Perception of the legal risks change from client to client and from deal to deal. What clients tend to have in common in respect of any deal, is that they expect lawyers to flag the main issues in the first days of the due diligence process. Just ask what their priorities are.

2. Identify industry risks. Regardless of their particular concerns, clients can help identifying the particular legal risks of the industry the target company operates in. Clients appreciate when asked to give their insight of the industry risks. They know them better than you do.

3. Start from the financials. The financial statements are the best initial source of information for the legal review. From their analysis, lawyers can detect the existence of proprietary intellectual property, real estate assets, participations in other companies, need for mandatory recapitalization, funds for litigation risks, and so on.

4. Public documents. In many jurisdictions precious information and documents can be extracted from the company house, the intellectual property registers and the real estate registers. Sometimes these documents are more updated and accurate than those provided by the target company.

5. Get market intel. Surprisingly, the internet can provide tons of official and unofficial information about the target company’s projects and problems. A source of business gossip can be found in the labour unions and consumer associations websites.

6. Ask for existing reports. The target company should have already a number of reports available for inspection, such as litigator reports, trademark attorney reports, insurance reports, environmental reports. Start from there and make sure you are authorized to speak to those consultants.

7. Bloody go there! I always insist to make the due diligence kick-off meeting at the target company premises. While it does not seem cost efficient, every time I had opportunity to walk around a factory or an office I saw something that I could not see from the papers.

8. The power of interview. People really want to talk. Just take the chance to go through the due diligence checklist with the target company in-house lawyers and managers and you will be flooded with information. This exercise will also help preventing misunderstanding about the checklist items.

9. Share with the other consultants of the buyer. Make sure your client inspires cooperation among its consultants and authorizes other consultants (financial, tax, environmental, etc.) to make available their reports to the others. When looking at due diligence reports from other consultants I always find something I did not see or find, and I always notice something they missed or not found.

10. List everything. Keep track of every single documents that is provided by the target company or the seller. I normally attach to the due diligence report the list of the reviewed documents. This will help limiting your exposure as a lawyer while serving as a tool when discussing exclusions to representations and warranties.

Copyright Giorgio Mariani 2016. All rights are reserved.