Due Diligence for Mergers and Acquisitions
The term Due Diligence can be translated into Portuguese as “Diligência prévia” and refers to the process of performing an audit to obtain information relating to a company—mainly for the purposes of a purchase, merger, or acquisition.
In the legal field, this type of investigation generally involves aspects regarding the company's social security and labor obligations, real estate, intellectual property, taxes, and regulatory issues.
A detailed analysis of contracts between the company, and third parties and employees are conducted, along with searches for cases at all types of courts, including labor, tax, and social security cases, in addition to legal analysis of assets and liabilities the company has and various other business documents. In addition, government records are searched if the company performs a regulated activity or one connected to the state.
The goal of due diligence is to understand in detail the company's actual position, so that all the risks inherent to their operations can be evaluated and, as much as possible, measured, so that the buyer and seller have all the necessary elements to arrive at a fair price for the company to be acquired.
That's all parties to the transaction should perform due diligence, whether it be to know your own company better, or so that you know what you are really buying. Due diligence involves the analysis of various operational and non-operational activities that that the company undertakes, leading to a legal diagnosis of the company's situation—a survey and quantification of liabilities and contingencies.
A rigorous due diligence process involves organized and defined steps performed by a law office specialized in such work, like Pontes Vieira Advogados.
The final phase of due diligence is the production of a report with detailed results, including the main problems, risks, and liabilities found, along with suggestions of strategies to solve or minimize them.