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Due Diligence Checklists for M&A

Wed 29 May 2024

What is M&A Due Diligence?

In mergers and acquisitions (M&A), due diligence serves as the cornerstone of informed decision-making and can significantly impact transaction valuation and post-closing integration. Generally, M&A due diligence can be thought of as the process of investigating and considering a merger or acquisition before completing it.

As part of this process, due diligence checklists play a pivotal role, serving as structured frameworks to ensure that no crucial detail is overlooked amidst the complexities of reviewing and analyzing contracts, organizational documents, financing agreements, and more.

Additionally, M&A due diligence checklists provide a record of the steps taken during the process and the findings uncovered. This documentation can be essential for regulatory compliance, internal reporting, and potential future audits or legal proceedings.

What to Include in an M&A Due Diligence Checklist


Ideally, an M&A due diligence checklist will not only consider key questions that sellers should be preparing to answer, and that buyers should be considering when reviewing documents as a part of the due diligence process in general, but also be tailored to the deal structure and industry of the target company.

Below are examples of key questions to add to your M&A due diligence checklist:

1. Organizational Documents

  • Are there any actions requiring special approvals (e.g., shareholder resolution), enhanced voting thresholds or unanimity, or any entrenched articles?
  • Are there corporate governance or voting right restrictions?

2. Material Contracts

  • Can this contract be terminated for cause or breach? Can this contract be terminated for convenience?
  • Is there a change of control clause?
  • Are there any restrictions on assignment, delegation or sub-contracting of rights / obligations under agreement?
  • Does the contract contain any indemnities?

3. Regulatory and Compliance Considerations

  • Are there any references in documentation to any need for the company to comply with upcoming changes in laws and regulations, and will that result in the company incurring costs?

4. Minutes & Resolutions

  • Are there minutes covering a period of [3] years preceding the transaction?
  • Are there references to any issues, contracts, or agreements outside the ordinary course of business which are not provided in the data room (e.g. threatened in litigation)?

5. Corporate Transaction Documents

  • Is any part of the consideration contingent, deferred or subject to a post-completion adjustment mechanism? (e.g. completion accounts, earn-outs or ratchets)
  • Are there any warranties / indemnities?

 

The Best M&A Due Diligence Software


As transaction timelines shrink and client expectations for efficiency soar, traditional manual due diligence reviews are becoming rarer—50% of law firms use technology to support transactional due diligence work, and 73% of M&A lawyers believe that AI technologies are “very important” or “important” in due diligence work. At the other end of the spectrum, newly introduced solutions that utilize AI whose workflow features do not align closely enough with the way corporate lawyers work will not support them sufficiently in enhancing their practice and client services.

Kira, Litera’s AI-powered contract review and analysis platform, has been trusted by the world’s top law firms for over 10 years (including 64% of the Am Law 100 law firms), and excels at assisting legal professionals to strike a better balance between the urgency of time constraints and the need for accuracy while meeting client demands for cost-effectiveness.

Kira comes with over 1,400 smart fields that have been trained by Litera’s in-house Legal Knowledge Engineering team to efficiently and accurately extract common clauses, provisions, and data points while providing actionable insights into your data. Kira’s Built-in Intelligence includes over 900 smart fields that capture all the provisions commonly reviewed during M&A due diligence.

Beyond extracting information, Kira can also summarize the extractions it produces, using an optional generative AI-powered feature, and answer crucial questions to help you understand the impact of a clause, provision, or data point from your contracts and documents. You can also create your own smart fields to find specific provisions, clauses, and data points from contracts and documents using Quick Study, our no-code machine learning tool.

With Kira, professional teams can complete a due diligence review in 20-80% less time, increase the accuracy of their review, and devote more of their time to the most demanding aspects of their matters. This means offering clients more options in terms of the scope of diligence conducted, as well as a level of service that will be difficult for others to match during a competitive bid process. It also allows professionals to take on new projects that may have previously been cost-prohibitive or impossible to complete without the assistance of technology.

Download Our M&A Due Diligence Checklists Now
To discover numerous opportunities where Kira can expedite your review process, check out our due diligence checklists for the UK and North America, which serve as starting points and helpful resources to reference during legal due diligence for M&A transactions.


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