A legal due diligence review is more than the legal equivalent to kicking the tires on the car. It is a detailed investigation using lawyers and CPAs to confirm documentation and the facts. It requires the analysis of a wide range of areas of focus, including an examination of the legality of contracts and litigation liabilities intellectual property, regulatory compliance and corporate records as well as financial reviews of financial statements and accounting policies and tax returns. It also involves an operational review of the company’s management structures, organizational what is a data room structure, products, services, sales marketing facilities and equipment, supply chain, customer relations as well as distribution and sales channels, and competition.
Legal due diligence can be a lengthy process, depending on complexity of the company and the magnitude of the transaction. This is particularly applicable to large public companies with virtual piles of data that lawyers must sort through. A lot of legal departments are using technology to simplify the process. For example, a document review platform that is integrated with AI tools.
Set up a framework for the investigation and establish a target before you begin your legal due diligence. It is beneficial to make a checklist with key areas that need to be addressed and to ensure that the legal team is able to agree on a strategy with the business owner. Prioritizing which areas need professional assistance is essential. For instance legal due diligence review of an IP holding company might include queries by an intellectual property specialist to determine if the company is in possession of any significant patents or other intellectual property rights and whether there are any infringement cases in the process or being considered.