Due Diligence Archives

Legal Considerations for Selling Your Emerging Growth Company Part 5: The Due Diligence Process

Business People Shaking Hands over the due diligence processThe phrase “due diligence” comes up in a wide variety of contexts in our culture and can mean anything from the reasonable type of preparation research a person does before making any kind of decision (“I did my due diligence on Yelp before making Valentine’s Day reservations”) to the specific “due diligence defense” an underwriter can present when sued for securities violations following an IPO gone bad. In the context of the sale of an emerging growth company, the due diligence process involves the potential buyer going through the records of the target company to see whether it is actually worth what the buyer hopes it is worth and to determining whether there are potential risks that would warrant not going forward with the deal.

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Red Flags in Purchasing a Business

As I’ve written before on this blog, due diligence is a crucial part of purchasing a business. I was recently interviewed by The Ambulatory M&A Advisor, and the resulting article can be found here: http://www.ambulatoryadvisor.com/current-red-flags/

While The Ambulatory M&A Advisor specializes in M&A for ambulatory care centers, the issues discussed apply to any business.

Enjoy!

Selling Your Business – Practical Tips for Sellers – Part 5: Due Diligence

This post was jointly written by Jennifer Wilson and Casey W. Riggs.

This is the fifth in a series of posts discussing the sale of a business from the seller’s perspective. In the first four posts, we provided an introduction to this series and discussed asset versus stock sales, seller financing, earn-outs, and letters of intent. In this fifth post, we’ll discuss the beginning of the deal process (after signing of the LOI), which typically begins with a comprehensive review of the seller’s business by the buyer (generally referred to by those in the M&A industry as simply “due diligence”).[1] [Read more…]

Drafting Nondisclosure Agreements in the M&A Context: Consider What Will Happen When the Deal Goes South

Let’s say you’re buying a business. As a condition to receiving more information, you are required to sign a nondisclosure agreement that contains all of the usual blather. You then start to sift through the mountains of information provided (and have your accountants and lawyers do the same, at considerable expense) to decide whether the company is worth purchasing, and on what terms. You like what you see, so you negotiate a letter of intent, and continue your due diligence investigation. You spend five or six months in negotiations and due diligence to the tune of many thousands of dollars (or more). [Read more…]

Looking to Invest? How to Determine Whether an Investment Is Worth It

This article was originally posted on business.com on May 1, 2012.

Investing in a new venture can be exciting. In addition to the potential to make a profit, many people invest in start-ups for the thrill of being involved with helping a fledgling company make its mark. The possibility of funding a breakthrough company is enough to get many investors enticed, committed, and involved.

However, it’s also a fact of life that many, if not most, start-up companies fail. Alongside that, some investment opportunities are fraudulent, being promoted by people only looking to swindle you out of your money and then move on to pursue other ventures (and victims). [Read more…]