Due Diligence

Whether representing the buyer or the seller in an acquisition transaction, lawyers are called upon to conduct a due diligence review of the company being acquired. As counsel for the buyer, a lawyer first wants to help the client determine whether the client wants to acquire the target company at all. Second, the lawyer wants to help the client evaluate the risks that would or could be assumed in acquiring the target company. As counsel for the seller, the lawyer needs to conduct due diligence in order to learn information about the client that will ultimately need to be disclosed in schedules to the acquisition agreement, whether it be a stock purchase, asset purchase or merger. The lawyer would also need some of the due diligence information in connection with rendering an opinion about the target company.

The due diligence process is usually initiated by the buyer, whose counsel sends to the target company a due diligence questionnaire. The seller is then expected to review the questionnaire, respond to it, and locate copies of the documents requested. Often a “data room” is created, either at the offices of the target company or counsel for the target company. In the process of assisting with the exercise of responding to the questionnaire, the seller’s counsel conducts its due diligence.

- John T. Gathings, Jr.
Moore & Van Allen PLLC