Legal Due Diligence in M&A: Risks and Protections for Buyers and Sellers
Legal due diligence aims to comprehensively review the target company’s legal affairs in order to identify and mitigate potential legal risks. This process typically covers contracts, assets, employees, intellectual property, regulatory compliance, and potential disputes.
Through legal due diligence, buyers gain a clearer understanding of the target company, enabling informed acquisition decisions, while sellers can better protect themselves against future warranty and indemnity claims.
By providing full and transparent disclosures, sellers may assert that risks identified during the due diligence process were known to and assumed by the buyer. Conversely, insufficient due diligence may lead to serious consequences for both parties.
Accordingly, legal due diligence is an essential component of any M&A transaction, facilitating smoother deal execution and reducing the risk of post-transaction disputes.
