Due Diligence

Irrespective of how the transaction is structured, due diligence is a must. This process is conducted by attorneys, accountants, engineers, and other professionals, as necessary. They will thoroughly examine and evaluate all aspects of the target company, both positive and negative, in order to determine whether any hidden liabilities may exist or whether some areas require more careful consideration and should be negotiated specifically before the execution of the transaction. For example, a buyer may require assurance from a seller that certain present contracts of the company will be prolonged in the future if the business of the company heavily depends on them, or perhaps the buyer wants to secure the key employees of the company. All these issues should be carefully negotiated in advance. Due diligence may expose some facts about the target company that cause the buyer to reconsider; he or she may renegotiate certain terms, bargain for a better deal, or decide not to proceed with the transaction at all if the overall state of the company is not what was initially presented and reasonably expected.

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