Hi all,
I am writing to ask your opinion on whether a lawyer with a finance and corporate law background would be able to do their own Financial and Legal Due Diligence for a $10M deal?
My background consists of banking and financial Juris Doctor with a finance background as well. We have all the key documents templates I believe would be necessary including Purchase and Sale Agreement drafted by Goodwin Proctor.
The transaction is relatively simple with no inventory or equipment and large contracts with national corporate clients.
My initial lean was to hire an attorney to do all the legal work as well as another experienced team for the financial due diligence.
However, we wrote up an extensive LOO which seemed better than most I have come across ourselves. We began doing Lender Cover Sheets, Summary Pages, and financial projections and these were also outstanding. In our experience with brokers and other agents, we find that we end up picking up the slack and doing most of the extraordinary work to achieve an excellent result.
My question is:
Could someone with a finance and corporate law background (mostly securities regulations) complete the reasonable financial and legal due diligence and get to closing?
Also, I would recommend any legal and/or accounting practice guides akin to those given to any associates to be able to lookout for any potential issues.
I am looking forward to your views!
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by a searcher
from Boston University
in Boston, MA, USA
in Boston, MA, USA
1yr ago
Doing own legal and financial due diligence as an attorney?
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by a searcher
1yr ago
in Toronto, ON, Canada
in Toronto, ON, Canada
What do your investors and lenders want to see? Some may have certain hard requirements. You should also consider liability if a deal goes wrong. Lawyers and other professionals have insurance for E&O.
Given what happened recently with Crowdstrike, my opinion is that there is way too much deference given to third-parties to cover your behind. But at the same time, you have to consider what your investors and lenders are comfortable with (or require), and also to understand your personal limitations.
Given what happened recently with Crowdstrike, my opinion is that there is way too much deference given to third-parties to cover your behind. But at the same time, you have to consider what your investors and lenders are comfortable with (or require), and also to understand your personal limitations.
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by an intermediary
1yr ago
from The University of Chicago in Chicago, IL, USA
from The University of Chicago in Chicago, IL, USA
You can do a lot yourself, but a third eye is recommended. Few thoughts.
1) Legal agreement is an allocation of risk. Many ready-made agreements or the ones for large M&A are either overkill to a point the seller side walks away, or they do not address nuances of a small business. (e.g. I had one where the definition of Knowledge killed the deal!).
2) Risk assessment requires operations analysis. I call is business DD. Who is doing that.
3) Small sellers have weak financials. There are many things a seller does in financial reporting, most of the time unknowingly. I generally walk if a seller has done something knowingly and does not disclose. In many cases, a seller can "manufacture" profits. QoE helps. Even audited financials have problems.
4) Answer to your question depends on answer to following: a) Would an attorney-buyer not need legal representation? b) Would an MBA-buyer not need accounting representation?
Happy to talk.
1) Legal agreement is an allocation of risk. Many ready-made agreements or the ones for large M&A are either overkill to a point the seller side walks away, or they do not address nuances of a small business. (e.g. I had one where the definition of Knowledge killed the deal!).
2) Risk assessment requires operations analysis. I call is business DD. Who is doing that.
3) Small sellers have weak financials. There are many things a seller does in financial reporting, most of the time unknowingly. I generally walk if a seller has done something knowingly and does not disclose. In many cases, a seller can "manufacture" profits. QoE helps. Even audited financials have problems.
4) Answer to your question depends on answer to following: a) Would an attorney-buyer not need legal representation? b) Would an MBA-buyer not need accounting representation?
Happy to talk.
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