Due diligence is a necessary and important part of business mergers and acquisitions. However, due diligence must be thorough in order to verify critical information that allows a business to make decisions in their best interest. If there is only a cursory review of due diligence documents, or if auditors do not understand the specifics of what they are reviewing, limited value will be gained, and this could lead to major oversights that may have seemed insignificant with a limited review.
Due Diligence Documents ID
The first step in conducting effective due diligence is to identify documents and records for review. While the nature of these records will vary somewhat depending on the nature of the business being acquired, in general, due diligence should include a review of:
- Audited financial statements
- Bank statements
- Loan notes and credit agreements
- Notes payable
- Contracts with vendors, suppliers and other third parties
- Accounts receivable, including “aging” reports
- Income tax records
- Any recently completed or pending litigation
- Lists of assets and fixed equipment
- Employment contracts and payroll reports for staff
- Employee handbook
Auditing Documents
Once records have been identified and located, it’s important to review them with a critical eye. Reviewers should not review documents in isolation, but should instead review each record as part of the larger picture.
When auditing financial documents, reviewers should look for any indication of lax internal controls, or signs that could signal noncompliance with accounting principles or corporate governance standards.
It’s also important to review documents with an eye toward identifying hidden costs, contingencies or commitments that are not obvious at first glance. A thorough audit of due diligence documents can highlight potential issues that could impact the proposed purchase price or conditions for the deal.
Baer Reed Can Help with Transaction Due Diligence
At Baer Reed, we have a team of trained and experienced legal professionals who are adept and efficient at handling transaction due diligence in a thorough manner. To learn more, contact us today or call us at (888) 433-1990.
Mr. Reyes graduated with honors from the Ateneo de Manila University, where he received the Procter and Gamble Student Excellence Award. He obtained his Juris Doctor degree from the Ateneo de Manila School of Law. During law school, Mr. Reyes was part of the Philippine delegation to the Willem C. Vis International Commercial Arbitration Moot held in Vienna, Austria. He was also a member of the Ateneo Society of International Law and the St. Thomas More Debate Society. He completed his internship at the Public Attorney’s Office. He wrote a thesis entitled: “To Kill A White Elephant: An Analysis of the Fiduciary Exception to the Corporate Attorney-Client Privilege”. Mr. Reyes is admitted to practice law in the Philippines and the State of New York.
Ms. Lardizabal-Manzano is a graduate of San Sebastian College-Recoletos, where she earned her B.A. in Political Science. In 2003, she received her law degree from Lyceum of the Philippines and was admitted to practice law in 2004.
Matthew Hersh earned a B.A. in Political Science from Columbia University in 1990 and graduated cum laude from Georgetown University Law Center in 1999. He also holds a master’s degree in international relations from the Georgetown University School of Foreign Service.
Cap. Avi Levak (Res. IDF) graduated from from Israel’s prestigious Ben-Gurion University of the Negev with a Bachelor of Science in Computer Science and Mathematics. He is also a Leadership and Communication coach trained in TuT coaching by Alon gal in Israel. Avi specializes in high-level, in-depth analysis of business and client needs, within systems and software strategy and architecture.
Ms. Tyler graduated cum laude from Georgetown University and received her law degree, cum laude, from Georgetown University Law Center. During law school, she interned at the United Nations Economic Commission for Europe. She also worked on The Tax Lawyer journal and was a member of the award-winning Barristers’ Council Mock Trial Team. Ms. Tyler is admitted to practice law in the State of California and the District of Columbia.
Ms. Cruz-Anonuevo graduated cum laude and top nine in her batch from Miriam College with a degree of Bachelor of Arts in InternationalStudies. She obtained her Juris Doctor degree from Ateneo de Manila University School of Law in Rockwell. During law school, she interned in Rivera, Santos, Maranan & Associates. She was also part of Ateneo’s Labor Law Bar Operations. She wrote her thesis on, “Stealing Privacy: Limitations on Media’s Photographic Invasion.,” Ms. Cruz-Anonuevo is admitted to practice law in the Philippines.
Ms. Aquino-Batallones obtained a Bachelor of Arts degree in Development Studies (with Minors in Global Politics and Hispanic Studies) from the Ateneo de Manila University. In 2011, she received her Juris Doctor degree from Ateneo de Manila University School of Law. During law school, she interned at Romulo Mabanta Buenaventura Sayoc & de los Angeles then became an intern of Ateneo Legal Services Center’s Clinical Legal Education Program.
Mr. De Guzman graduated from San Beda College with a degree of Bachelor of Arts Major in Economics and received his law degree from San Beda College of Law. He is multilingual and is fluent in three languages: Chinese, Filipino, and English. He was admitted to the Philippine Bar in 2003.