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What is a legal due diligence?

Prior to the acquisition, the buyer is usually required to familiarize itself with the financial situation, agreements, responsibilities, administration, etc. of the company or business to be acquired, for which the buyer will be responsible in the future. It is recommended that such due diligence, to the extent appropriate, is carried out regardless of the size, industry or form of execution of the acquisition. A due diligence usually includes reviewing the financial position of the company as well as reviewing agreements, intellectual property rights, employee matters, and other matters relating to the responsibilities of the target.

Why should a buyer perform a due diligence?

The purpose of a due diligence is to make the buyer aware of the risks and opportunities associated with the target of the transaction. The findings of the due diligence may have an impact on the buyer's desire to carry out a transaction or to the purchase price or the terms of share or asset  sale and purchase agreement. Due diligence findings also generally serve as an useful to-do list during the post-acquisition integration period. When the potential risks and development targets of the target company are known in advance, the takeover of the company is accelerated and the buyer will be able to develop the business faster after the transaction.

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