Legal due diligence goes beyond rolling the tires of the car. It is a comprehensive investigation that uses lawyers and CPAs to verify documentation and data. It involves the examination of a variety of subject matter, including a legal review of material contracts as well as litigation liabilities, intellectual property, regulatory compliance, corporate records, financial reviews of accounting policies and financial statements, and tax returns. It also involves an operational review of the business’s management structures, organizational structure, sales, products, marketing, facilities and equipment, supply chain, customer relationships and distribution channels, as well as competition.
Based on the size of the deal and how complex the company is and the complexity of the company, the legal due diligence process can be time consuming, particularly with large public companies with massive piles of documents that lawyers have to sort through. A lot of legal departments are making use of technology to speed up the process. For instance the document review platform that is integrated with AI tools.
Create a plan for the investigation and set a goal prior to when you begin the legal due diligence. It is helpful to develop a checklist with key areas that must be covered and to have the legal team agree on a plan of action with the business owner. Prioritizing the areas that require specialist input is important. A legal due diligence audit on an IP holding company, for instance, may include questions by an intellectual-property expert to determine if the company has any patents that are important or other intellectual property rights, and whether there are any infringement lawsuits currently being considered or expected to be filed.
https://medicaldataroom.com/how-to-prepare-your-legal-documents-for-due-diligence/
