Due Diligence - To-Do List
The risks involved in making a corporate acquisition
- whether of a large asset, a division of an existing
company, or even a competitor - are enormous, in part
because there are so many unknowns to consider. Keith
Rosenbaum, a lawyer based in Irvine, California, who specializes
in acquisitions, advises business owners to follow this
- Housekeeping: "Make certain the person
you're negotiating with has the corporate authority
to make an agreement." Then double-check the company's
articles, bylaws, and corporate minutes to confirm that
your understanding of the company (or asset) reflects
- Shareholders: Get a list of all shareholders
or partners, including any special rights, stock-transfer
restrictions, and pledges that exist against either
assets or stock.
- Financials: Check every financial document
that the company can provide, including bank statements,
audited financial reports, and all bank and financing
agreements. Make certain, among other things, that there
are no liens against the assets you're interested in.
- Assets: Don't forget to physically inspect
all key assets.
- Technical details: Check with a lawyer or industry
source to see what other issues are crucial to your
particular deal. One example: "When purchasing
a company with significant intellectual-property assets,
such as patents, you must make certain they're held
in the company's name so that you end up owning them,"
From: Inc magazine | February 1996 By: Jill Andresky