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April Acquisitions - Stage Two, Due Diligence

During this month, Scott Richardson from our Corporate and Commercial Department will be providing a four stage summary of the acquisition process for anyone looking to purchase a business or shares in a company. This article concentrates on the second stage, undertaking thorough legal and financial due diligence on the target business or company.

After agreeing terms with the Seller and hopefully entering into Heads of Terms, the next stage of the acquisitions process is to undertake due diligence on the target business or company.

This process will usually consist of sending an information request (or questionnaire) to the Seller and their legal representatives requesting information on the target, including the following:

  • key commercial contracts;
  • employee details;
  • ongoing litigation or claims;
  • assets and liabilities of the target; and
  • intellectual property rights owned or used by the target.

In addition to the legal due diligence, you and your accountants should also carry out more detailed financial due diligence on the target to make sure you are not overpaying for the target.

Whilst this stage is often the most time consuming with lots of documents to review, it is critically important to:

a) ensure you have a clear understanding of what you are acquiring;

b) include the appropriate protections in the main sales agreement in the form of warranties and indemnities; and 

c) ultimately decide whether you intend to proceed with the acquisition or not.

If you are considering acquiring a business or shares in a company, or require legal assistance with undertaking appropriate legal due diligence on the target business or company, please contact Scott Richardson in our Corporate and Commercial Team by phone on 01329 227907 or by email on scott.richardson@glanvilles.co.uk


The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute, legal advice, and should not be relied upon as advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article. All content was correct at the time of publishing. Legal advice should always be sought in relation to specific circumstances.