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As your company continues to grow and prosper, there will undoubtedly be many opportunities for you to sell to other corporate entities. Likewise, you may also find yourself thinking of acquiring smaller competitors or start-ups new to your commercial space.

These types of sales – often known as mergers and acquisitions – can be excellent opportunities for you to:

  • expand your brand name,

  • enter into new markets,

  • acquire capital,

  • acquire talent,

  • all of which are necessary to continue to move forward as a company.

Mergers and acquisitions also require significant research and due diligence. Obviously, it is important to avoid acquiring a company that is ultimately a bad investment, and to eliminate the possibility of being taken over by another entity’s disorganized and inexperienced leadership team. When beginning due diligence, there are several important steps to consider.

The Goals of Due Diligence for Buyers and Sellers in Rancho Cucamonga

Buyers and sellers entering into a merger or acquisition will have very different goals and objectives that they want to achieve during the M&A process.

Sellers will typically want to complete the acquisition as quickly as possible in order to avoid the potential for any unexpected events, such as a key employee departure or lawsuit, to arise. Sellers will be more focused on simply ensuring an acceptable change of control, and minimizing the possibility of a buyer backtracking on a purchase.  

Buyers, by contrast, will want to take the process more slowly. The value of their purchase comes from ensuring that the entity they are buying is exactly what it says it is, and has the possibility to enhance their existing economic value. This means a careful review of the seller’s existing business structure, prior performance, and anticipated future performance.

Necessary Parts of Any Good Due Diligence

Whether buyer or seller, there are several important categories of information that you will want to include in your due diligence checklist. Reviewing this type of information will help you go into a transaction fully prepared and aware of all possible outcomes and contingencies.

  • Corporate Structure documents, including articles of incorporation, bylaws, minutes from board meetings, and stockholder agreements. These documents will give you insight into how the company is structured and who has a vested interest in the company’s success.

  • Taxes. Tax documents will shed light on any existing or prior tax liabilities, and also provide additional information about a company’s revenue sources and outstanding debts.

  • Documentation of existing assets of the company.

  • Existing contracts, which show a company’s ongoing consumers, but also make clear the responsibilities that the buyer will have to assume upon completion of the deal.

  • If in a technological field, any documents concerning intellectual property that the company currently holds.

  • Documents concerning any pending litigation involving either party.

While these are many of the big areas of concern that any due diligence approach should cover, they are not the only documents you may need to review. Depending on your industry or the circumstances of your merger or acquisition, there may be many other areas of necessary review.

California Attorneys Providing a Comprehensive Due Diligence Approach

While it is possible to go it alone in the due diligence process, and handle a merger or sale on your own, it is not recommended. Due diligence is an extensive, exhausting process that can require significant time and energy, as well as detailed knowledge about the documents being reviewed.  Hiring an attorney to assist you can make the process much smoother and ultimately, more successful.

At CKB Vienna LLP, our attorneys have handled mergers and acquisitions, and the due diligence process, for hundreds of clients throughout Rancho Cucamonga and the surrounding areas. For more information, contact us online or at 909-980-1040.