Due diligence is the most important part of a merger. It is the formality of the buyer being presented with evidence, if not actual proof, that the seller’s claims are accurate.
In the heat of the fear and excitement of negotiations leading up to closing a deal, a lot will be said and done. The buyer will have digested the contents of an overview, an executive summary, and a detailed pitch. They will have asked questions of the seller on broad topics and specific issues. The buyer knows these representations must be tested. There is nothing rude, threatening, or insulting about the requirement.
It is the directors’ duty to the shareholders of the buying company, to be diligent in their actions, particularly in making acquisitions for the buying company. Before closing off a deal and signing a commitment to pay the seller, the buying directors must act with the diligence which is due - the due diligence.
The activity of acting with the required diligence due in investigating the affairs of the target business has now become a noun. “We gotta do a due diligence!”
“You do due diligence to get into a merger, not to get out of one,” said Bradley Wilson, the attorney for Twitter in arguments before the Delaware Chancery Court.
Our PrepareYourBusinessForSale Practice is premised on helping sellers get their due diligence right.
Current Due Diligence Headlines
Elon Musk, Twitter, & Due Diligence
Due diligence planning should not be left to the purchaser of the business at the end of a stressful negotiation process.
Due diligence case study
In our growing series revolving around Elon Musk and his conceived decision (ill, or otherwise) to acquire Twitter, in the feature box, above, we are developing a case study of how not to engage in M&A transactions.
Most enduring of all the lessons we can learn from this theatre of the absurd: always act with the diligence due, even if you believe you are the only person at risk, and have mountains of cash to flaunt and throw around.