A legal due diligence goes beyond running the tires of a car. It is a thorough review that includes lawyers and CPAs who verify documents and data. It involves a comprehensive review of a variety of areas, such as a legal review which includes contracts, litigation liabilities, and intellectual property and corporate records and regulatory compliance, an audit of financials, which includes accounting policies, financial statements and tax returns. It also includes an operational review of the business’s management structures, organizational structure, products, services, sales, marketing facilities and equipment supply chain, customer relations as well as distribution find and sales channels, and competition.

Legal due diligence can be a long-winded process, depending on extent of the company’s operations and the size of the transaction. This is especially relevant for large public companies that have virtual piles of documents that lawyers need to sort through. Many legal departments are now using technology to streamline the process. For instance the document review platform integrated with AI tools.

Set up a framework for your investigation and define a goal before you begin the legal due diligence. It is helpful to prepare a checklist of key areas to be covered and have the legal team agree upon the best strategy for the investigation with the business owners. Prioritizing which areas need expert input is crucial. For example legal due diligence review of an IP holding company could involve questions from an intellectual property specialist to determine if the company holds any significant patents or other intellectual property rights and whether there are any infringement proceedings that are pending or threatened.

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