Know About All The Legal Process Involved In The Due Diligence

December 8, 2021    propertylawyersperthwide
Know About All The Legal Process Involved In The Due Diligence

Due diligence, especially legal, can be the deciding factor in successfully making a business or property acquisition deal. It enables both the seller and buyer to locate potential liabilities and know any legal risks involved.

Defining Due Diligence Process

Before an agreement takes place, an in-depth audit or review of a company is undertaken. This process is known as Due Diligence. It involves assessing all relevant factors that affect a business, its success, and its risks. Due diligence is done to ensure informed decisions regarding the company acquisition. In property deals, due diligence is done to ensure that the buyer makes an informed choice. Experienced property lawyers in Perth can help you with this process.

Types of Due Diligence

Generally, there are four types of Due Diligence in mergers and acquisitions.

  1. Legal Due Diligence

This focuses on the legal aspects of the business and its transactions with the stakeholders. The generally reviewed areas are regulatory issues, licenses, contracts, and any pending legal liabilities. Due diligence lawyers assist with the nuances of this review.

  1. Financial Due Diligence

This process focuses on the financial performance of the business till the present time and ensures that sustainable and accurate numbers are presented in the financial statements.

  1. Operational Due Diligence

This due diligence essentially looks at the company turning inputs into outputs, and this is generally regarded as the type of due diligence that is the most forward-looking.

  1. Tax Due Diligence

This form of due diligence focuses on a company’s tax affairs and ensures that its tax liabilities are paid in totality to date. It also looks at how an M&A will affect the tax liabilities of the new business that the deal will create.

Importance Of Due Diligence

An M&A is the most important corporate transaction for any business, and Due Diligence enables companies to make these transactions from a well-informed space. It is valuable for the buyer as it identifies the weaknesses of the target company and some opportunities that were not recognized before.

Challenges of Due Diligence

This specialized process might feel overwhelming to most people without sufficient experience. There can be a lot of challenges. Following are some of them:

Not Understanding What To Enquire

The issues and the questions that are to be asked should be known from before, which will lead to proper investigation.

Delay In Execution

The process involves asking the sellers to share documentation and information. This can take time and amount to delay the closing of the transactions.

Lack Of Communication

Many sellers tend to consider due diligence as a cumbersome process, which can lead to poor communication, impatience, and even conflict.

Lack Of Expertise

You might have to appoint some experts like property lawyers for some part of the due diligence process.


The process can be costly, and it can run for months and a lot of consultations with specialists.

Legal Due Diligence Process

A Legal due diligence process takes place in three stages. These are:


This stage is crucial as the goals and priorities are set. There might be one goal or several small goals, and Prioritizing them is important at this stage.


The lawyer or a team collects documents and facts, and they study those to find out if the purchase is worthwhile. This process involves a lot of interviews and documents, and the lawyer creates a whole picture by gathering information.


The investigation results are revealed by presenting the date most concisely.

It may include a summary, opinions, and analysis.

Role Of A Property Lawyer In Due Diligence

Appointing a property lawyer during due diligence is crucial. They have knowledge and experience regarding the intricacies of the process, and they give valuable advice to their clients and support them during the method. These can include:

  1. Providing suggestions and examining the contracts involved in the deal.
  2. Giving advice and examining relevant legal third-party documents such as guarantees, franchise agreements, supplier contracts, loans, and other documents that impact the profitability of the contract.
  3. Providing suggestions and analysing the legal aspects and implementation of adding in previous mortgages, security, recorded warnings on real property given as security.
  4. Analysing and providing suggestions on commercial documents if necessary. Interaction with third-party advisers, such as accountants.
  5. Performing study of records gathered by regulatory agencies.

In The End

Due diligence is important as it decides on the future growth of the individual who is undertaking a business or a property. This work is detailed and nuanced. Any sort of mistake might have the risk of making decisions that might prove costly in the long run. Therefore, it is always advisable to hire experts in the business for a long time. Specialized property lawyers would help you make an informed choice and provide complete assistance with the process.

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