Mergers & Acquisitions

Due Diligence | Part 2 | Legal Issues

In the introduction to due diligence, we explained the importance of engaging in extensive due diligence prior to purchasing a business, and we broke down due diligence into six categories. Today’s post will highlight the key legal issues the purchaser should be aware of when purchasing a business.

Reviewing the Owner’s Governing Documents Prior to any acquisition, the purchaser will need to know the basic organizational structure of the business, i.e. how it was formed, its governing documents, and its key personnel. Knowing how the business is organized will dictate how the transaction will be structured.

Securities Matters Is the purchase going to be structured as a stock purchase? How many shareholders currently own stock in the company? Is there a shareholder agreement? Are...

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Mergers & Acquisitions

Due Diligence | Part 1 | An Introduction to the Series

“By failing to prepare you are preparing to fail.” This great Benjamin Franklin quote is a helpful point of reference for understanding why due diligence is so important  in the purchase and sale of a business. The buyer needs to make sure he or she knows exactly what he or she is purchasing. Due diligence offers the purchaser an opportunity to get to know the seller’s company and avoid being caught off guard by an undisclosed or undiscovered issue after the company is acquired. If the buyer fails to thoroughly complete the due diligence process, it is very likely that person will be disappointed in his or her investment.

The due diligence process allows the purchaser to identify the risks with...

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