Corporate
Corporate Tip 5: Private Mergers & Acquisitions
Part 2: Purpose of Due Diligence
Importance of Due Diligence
Due diligence is crucial in transactions such as acquisitions and public document issuances. It helps assess the target business, verify seller representations and identify potential risks before making contractual commitments. In acquisitions, due diligence impacts pricing, seller indemnities and warranties. In public documents such as prospectuses, it ensures the information provided is complete, accurate and not misleading.
Structuring and Conducting Due Diligence
Conducting effective due diligence requires a structured approach. First, agree on the scope with the client, identify exclusions and divide tasks among professional parties, including overseas counsel for public searches. Use a comprehensive legal due diligence checklist to review company documents, contracts and regulatory filings. Be aware of practical constraints such as tight timeframes and incomplete documents.
Planning, Communication and Reporting
Organise kick-off meetings with the client and involved parties to establish the review approach, timing and cost. Set up clear communication channels and a centralised reporting system for information sharing to avoid duplication of work. Promptly inform the client of any deal-breakers. The due diligence report should be written in plain English, aligning findings with the client's commercial objectives to ensure it is accessible, actionable and enables informed decision-making.
Read more about the legal framework and considerations for a simple vanilla transaction under Singapore law to acquire a private limited company in SAL’s M&A Transaction Guide on https://www.lawnet.com/guides/id/111276/mergers-and-acquisitions-transaction-guide?ref=p-gc.
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