Legal due diligence is more than just driving around in a car. It is an extensive investigation that involves lawyers and CPAs to verify documentation and evidence. It involves a comprehensive review of a variety of areas, including a legal audit, which includes contracts, litigation liabilities and intellectual property and corporate records and regulatory compliance. It also includes a financial review which includes financial statements, accounting policies and tax returns. It also involves a thorough review of the organizational structure, management and the products, services marketing, sales, facilities and equipment.
Legal due diligence can be a lengthy process, based on the nature of the business and the amount of money involved in the transaction. This is particularly applicable to large public companies with virtual piles of documents that lawyers have to sort through. This is why many legal departments have started to make use of technology to streamline and expedite the process, like an online platform for document review that is integrated with AI tools.
Before you begin the legal due diligence process, set a medicaldataroom.com/select-the-best-data-room-for-due-diligence/ framework and goal for the investigation. It is useful to create a checklist of the areas to be addressed and to ensure that the legal team has a consensus on a plan of action with the business owner. Prioritizing the areas that require professional assistance is essential. For example, a legal due diligence review of an IP holding company could include inquiries from an intellectual property specialist to determine whether the company has any significant patents or other intellectual property rights, and whether there are any infringement lawsuits that are pending or threatened.
