Legal due diligence is the process of collecting, understanding, and explaining all the legal risks associated with a transaction. It is an investigation into a business by reviewing documents and interviewing employees. Why is legal due diligence important? Apolo Lawyers will give some reasons in order to answer this question. Our clients, who have a problem with legal due diligence issues, do not hesitate to contact us via email at contact@apolo.com.vn or Hotline - (+84) 903419479.

There are many reasons that legal due diligence is important in M&A transactions. But in this article, we will give some main reasons that explain why due diligence is important. 

1. Reducing the risks

A properly conducted legal due diligence on a target company reduces the likelihood of unpleasant surprises after the completion of a mergers and acquisition process. This would provide the purchaser the opportunity to gain as much background information and understanding about the business target. Since no one offers to sell but raises errors in their products. Legal due diligence will help the buyer to unravel some unclear facts about the target company, which helps the buyer to recognize and reduce the risks that they can meet.

2. Understanding of the Organizations

Legal due diligence will give the buyer/investor the information it needs to learn about its target company and structure its purchase. The legal due diligence highlights major and minor issues bordering on the corporate structure of the target, legal ownership of assets (including legal status of real properties, investments and cash-in-bank), contractual obligations of the target, current or pending litigation or disputes involving the target, regulatory or statutory breaches, financial liabilities, compliance with sector-regulators, tax status among others.

3.Supporting drafting and negotiations in merger and acquisition process

The information obtained in legal due diligence may also serve as a platform to negotiate the purchase price of the shares or assets of target. A large part of a merger or acquisition is negotiating and drafting the agreement. The good and bad information gathered during the legal due diligence will lend support to the negotiations. This is true whether a merger or acquisition. The information discovered in legal due diligence is especially helpful in assessing risk. Drafting of the agreement is in-depth and complicated. This should be created by an experienced lawyer.

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4. Helps to Value the Target Company

Legal due diligence will inform the investor/buyer of some of the following: contingent liabilities, restriction on businesses, pending litigations, insurance policies, employee benefits, intellectual property rights, etc.

In conclusion, A legal due diligence in an M&A transaction uncovers issues and acts as an early warning signal to a purchaser. It provides alternatives or solutions to reduce the legal risks identified during the due diligence process. A legal due diligence is a comprehensive legal analysis and complex. So, it should be conducted by legal advisors/lawyers.

Apollo Lawyers is a law firm operating on the foundation of taking prestige and responsibility first. Our lawyers are high-professional and experienced, always working with dedication, enthusiasm, and efficiency. We always provide professional legal services with outstanding quality. We also keep the information of our clients completely confidential. We bring always our customers peace of mind and maximum benefits in each case. If you want to know more detail about our service, please contact Apolo Lawyers via email at contact@apolo.com.vn or Hotline - (+84) 903419479 for the best legal advice and support.

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