On Mergers And Acquisitions – How An Auckland Lawyer Helps In Due Diligence

Where there are mergers and acquisitions, you can expect to find lawyers doing due diligence work on behalf of their clients. But if you are like most people, you are probably wondering what exactly is the diligence work involved. We did a little research and found that there are certain due diligence areas that only lawyers can do. The following article can help you look for an Auckland lawyer for business acquisition.

The first one is the review of legal documents. By legal documents, we mean documents that make the target company a legal entity. If it’s a partnership, it would be the articles of incorporation, and if it’s a limited liability company, it would be the company formation documents. Because of the legal jargon used in these documents, only lawyers with corporate law experience would know how to decipher them.

Any company, whether a partnership, a limited liability company, even a sole trader, ought to have accounts, minutes of Annual General meetings, and memoranda. Other formal documents. include, company bylaws, the minutes of shareholder and board of director meetings, and outstanding warrants and option agreements. All of these need to be reviewed in due diligence by an experienced lawyer for business acquisitions.

The second area of concern in due diligence that lawyers tackle are the different agreements entered into with different third-parties. Legal agreements include all major contracts with distributors, suppliers, and customers, as well as confidentiality and non-compete agreements, intellectual property agreements, and equipment leases. Other agreements that need to be reviewed are insurance policies and real estate agreements such as property leases.

The third area that corporate lawyers do in due diligence is a review of license and permits. The idea here is to determine whether or not the target company is in compliance with the local laws, and also, does the company have the right to use various products, trade marks, licences, and other key facets and assets that the business is offering for sale. For example, the buyer may want to purchase the rights to sell a brand in a particular area.  The owner may be saying that this is the case but your business acquisition lawyer will have to verify that this is the situation. They will also check to see how long that licence has to run. If it is going to expire in the near future and there is no right of renewal, then it will be worth a lot less than a licence that can be used for a number of years to come.

Other areas that are of special concern in due diligence work include the list of all major assets and liabilities, UCC liens, and customer problems.

The areas we mentioned above are the legal areas of concern that are tackled during due diligence work. There is one other area that is reviewed at the same time as the legal papers and it is the financial standing of the target company.

During due diligence work, income tax and GST returns are reviewed. But this is not the only part that is reviewed. Also reviewed are the financial statements and outstanding tax bills.  Again, if you are about to enter into a merger or acquisition deal, you should enlist the help of a business lawyer who has experience in all the areas we mentioned above. What the lawyers do is take a look at all the relevant documents to determine the overall health of the company and its financial standing.

Due diligence should not be overlooked as it can help the acquiring company avoid problems later on. If you need help in finding a business lawyer, you can go to websites like www.mcveaghfleming.co.nz which is one the most respected Auckland lawyers for business acquisitions. They will be happy to help you with your proposed venture.