ContractsCounsel Logo
Home Blog Due Diligence

Jump to Section

ContractsCounsel has assisted 322 clients with business purchase agreements and maintains a network of 172 corporate lawyers available daily. These lawyers collectively have 35 reviews to help you choose the best lawyer for your needs.

What is Due Diligence?

Due diligence relates to an investigation or review of all the facts and details about a specific matter. The term applies more commonly within the business context where the buyer undertakes a complete and appropriate view of all facts about an asset before completing the purchase.

Within the financial context, due diligence may refer to examining all records about a specific deal before entering into a proposed transaction. This exercise of care has become an essential principle in governing modern-day interactions.

In most cases, the burden of due diligence is with the buyer. However, the two parties may agree to share the costs depending on the underlying arrangements. Even then, the seller also has a duty to ensure full disclosure.

What is Due Diligence in Law?

Due diligence is a legal obligation in some circumstances. For example, the events of the stock market crash 1929 necessitated the need to investigate material facts as a legal requirement in specific contexts. In addition, in 1933, the Securities Act came into operation, effectively making due diligence a legal obligation to enhance transparency.

The legal changes meant that security brokers and dealers are entirely liable for full disclosure of any information related to the instruments they may be selling. Today, the law requires that companies undergo complete audits before any securities are auctioned. The audit process seeks to assure buyers that the instruments are healthy.

The application of due diligence in law attempts to protect and minimize the risk of risky dealings. Full disclosure is a critical foundation of due diligence. In addition, the process allows both parties to identify red flags before entering any contractual agreements.

Meet some lawyers on our platform

Daehoon P.

203 projects on CC
CC verified
View Profile

Danny J.

13 projects on CC
CC verified
View Profile

Daniel R.

154 projects on CC
CC verified
View Profile

Darryl S.

79 projects on CC
CC verified
View Profile

Types of Due Diligence

Due diligence may take different types and forms. It all depends on the area of operation a party operates in at a given time. Here're some common types of due diligence.

By obtaining the necessary legal opinions and assistance from qualified lawyers, a company can maneuver the different types of due diligence that exist today.

Financial Due Diligence

Financial due diligence is among the most important due diligence in the current world. Before proceeding with any transaction, firms should understand the financial information, stability, and risks.

Financial due diligence seeks to investigate the accuracy of all the financial records presented in the confidentiality information memorandum or (CIM). For example, one may consider financial statements, company forecasts, and projections in a financial audit.

It's also important to consider inventory schedules when conducting financial due diligence. Financial due diligence is perhaps the most common form of care exercise today.

Legal Due Diligence

Legal due diligence is the other common form of due consideration today. Legal due diligence assesses whether a target firm has any underlying issues of legal subservience. It further attempts to understand whether the company may be embroiled in any legal issues.

The focus will be on the contracts and compliance doctrines during legal due diligence. However, the legal due diligence process may also focus on other important papers such as corporate documents and board meeting minutes. It's important to involve a lawyer during such an investigation to help you confirm facts.

Human Resources Due Diligence

Human resource due diligence is an essential process for any organization. This type of due diligence focuses on the most asset within the organization, which is the employee. Therefore, when undertaking human resources due diligence, the most important considerations include a company's organizational structure.

The other key focus, in this case, is the compensation and benefits inherent within the company's system. The investigation may also pay specific attention to existing union contracts between a company and other unions.

Due diligence at the human resource level also considers any existing harassment and wrongful terminations within a company. Such factors that may present legal consequences for a firm should be top of the agenda when conducting human resources due diligence.

Operational Due Diligence

When undertaking operational due diligence, the focus should be more on the company's operations. This process aims to identify all the existing issues pertaining to the company's operations. Such investigations may focus more on technology, assets, and existing facilities.

The goal of operational due diligence should be to unearth any hidden risks in the operations of a business. Further, operational due diligence focuses on unearthing potential liabilities in the business's operations.

Environmental Due Diligence

Every company interacts with the external environment in one way or another. As such, environmental due diligence seeks to ensure that these companies undertake the process of external due diligence within the confined set out environmental regulation procedures.

Some of the common areas of focus during environmental due diligence include the company's facilities, processes, and equipment. In addition, the goal is to understand whether the company might have infringed on any existing regulations governing environmental protection.

The primary purpose of conducting this review is to negate any risk of penalties in the present and the future. Companies that work environmental due diligence in advance can easily avoid the legal backlash of pollution.

Common areas of focus during environmental due diligence include the list of environmental permits and licenses. Every organization should have these permits and licenses to confirm their compliance. In addition, a close check of all the correspondences and notices from local and federal regulatory agencies is also necessary at this point.

Business Due Diligence

Business due diligence involves closely investigating all the business transactions and strategies adopted by a business and their impact on the bottom line. In addition, the examination may consider some important processes within the business, such as mergers, acquisitions, or privatization.

Buyers opt for either self-due diligence or reverse due diligence to capture all the material facts about the company beforehand. It's important to have a lawyer by your side during the process.

Acquisition lawyers, for instance, provide adequate information and legal support when dealing with matters such as asset purchase agreements.

Even when the issue is a pending acquisition with complex paperwork, you can still trust lawyers with the business purchase agreement.

Due Diligence Checklist

It's important to note that due diligence is a process with many moving parts. Therefore, it takes a greater focus on the due diligence checklist to determine the priority areas and the steps to help you get the best results.

The good thing is that today, the internet provides a wide range of checklists in the form of templates that parties can utilize to undertake comprehensive reviews effectively.

A checklist helps parties tick all the necessary moving parts during the review process. However, this also means consuming and analyzing loads of important information.

Here’s a due diligence checklist you can consider.

Examples of Due Diligence

There are varying examples that indicate due diligence. Here're some common and not-so-common examples.

  • A thorough investigation of a company to determine whether it's a sound investment before commencing a merger is a practical example of due diligence.
  • A consumer reviewing all the online reviews about a product before buying is another common example of due diligence.
  • When an underwriter audits an issuer's business and operations before selling it, this is also a practical example of due diligence.
  • In the case of human resources, an employer may undertake due diligence by initiating prior contact with the referees to ensure that they apt candidates.
  • Conducting a comprehensive review of the property before purchasing is also an excellent example of due diligence.

Here’re some examples of due diligence.

Get Help with Due Diligence

Due diligence is an important yet very tasking process. Whether you are undertaking business purchase agreement pricing or asset purchase, getting consulting agreement review is extremely important.

We have a team of seasoned lawyers who can handle your asset purchase agreements and draft your letter of intent. Contact us today for exceptional legal support.


ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.


Need help with a Business Purchase Agreement?

Create a free project posting
Clients Rate Lawyers 4.9 Stars
based on 11,588 reviews

Meet some of our Lawyers

Antoine D. on ContractsCounsel
View Antoine
4.8 (3)
Member Since:
February 7, 2022

Antoine D.

Owner
Free Consultation
Fort Lauderdale
8 Yrs Experience
Licensed in FL
Howard University School of Law

In his firm, Talented Tenth Law, Antoine focuses on helping people maximize their protection and prosperity in the courtroom and the boardroom. His firm’s services include representing people in lawsuits involving breach of contract, many types of civil lawsuits and helping business owners win government contracts among other things.

Scott S. on ContractsCounsel
View Scott
5.0 (18)
Member Since:
July 28, 2020

Scott S.

Principal
Free Consultation
New York, NY
43 Yrs Experience
Licensed in NY
New York University School of Law

I have over 25 years' experience representing individual and company clients, large and small, in transactions such as mergers and acquisitions, private offerings of securities, commercial loans and commercial endeavors (supply contracts, manufacturing agreements, joint ventures, intellectual property licenses, etc.). My particular specialty is in complex and novel drafting.

Billy Joe M. on ContractsCounsel
View Billy Joe
5.0 (3)
Member Since:
October 26, 2021

Billy Joe M.

Partner Attorney
Free Consultation
Chicago, IL
15 Yrs Experience
Licensed in IL
University of Illinois at Urbana-Champaign

I graduated from the University of Illinois at Urbana-Champaign in 2006 with a degree in Political Science, Finance, and Economics. I stayed around Champaign for law school and graduated in 2009. I then worked at a big law firm in downtown Chicago. It was boring, so I quit in early 2011. I thought that I could not be happy practicing law - I was wrong. After I quit the traditional law firm life, I began representing my own clients. I realize now that I love helping normal people, small business owners, and non-profits address a variety of legal issues. I hope to hear from you.

Gill D. on ContractsCounsel
View Gill
5.0 (38)
Member Since:
July 31, 2022

Gill D.

Attorney
Free Consultation
Tampa
15 Yrs Experience
Licensed in FL
Stetson University College of Law

Erik has been a practicing attorney in Florida for over a decade. He specializes in employment and real estate contracts. He has represented clients big and small and can assist with any contract issue.

Travis D. on ContractsCounsel
View Travis
5.0 (1)
Member Since:
August 8, 2022

Travis D.

Partner
Free Consultation
Norman, OK
4 Yrs Experience
Licensed in OK
University of Oklahoma

Travis counsels individuals and businesses on a broad range of complex topics. His practice centers on producing efficient, client-driven results. He concentrates his practice on real estate, construction, and general business matters with an emphasis on assisting clients both before and after problems occur by drafting contracts designed to best position clients to avoid disputes and litigating matters to a final resolution if problems emerge. Born and raised in Oklahoma, Travis is a triple graduate of the University of Oklahoma, having obtained his Bachelor of Arts, Master of Business Administration, and Juris Doctor degrees from OU. Prior to practicing law, Travis managed the finances and business operations of a successful construction supply company for several years. This insight into sophisticated business dealings, contractual issues, and strategic planning makes him uniquely qualified to handle a wide range of legal matters. Travis lives in Norman with his wife, Haley, dogs, Walter and Poppy, and cat, Ernest. Outside of the office, Travis enjoys playing golf and reading.

Deborah W. on ContractsCounsel
View Deborah
Member Since:
September 4, 2022

Deborah W.

Managing Partner
Free Consultation
Michigan
27 Yrs Experience
Licensed in MI
Michigan State University College of Law

Williamson Health Law is an established and trusted law firm focused on representing hospitals, health plans, physician groups, physicians, physical therapy businesses, psychologists and other health care providers and businesses in all aspects of health law. including the Stark law, the Anti-Kickback Statute (“AKS”), the Health Insurance Portability and Accountability Act (“HIPAA”), regulatory compliance, Medicare and Blue Cross audits and overpayment appeals, payer departicipation and disaffiliation appeals, payer and provider disputes, reimbursement and billing, compliance plans, health care industry contracts and professional licensure. We represent clients throughout Michigan and the U.S. with certain federal matters such as federal regulatory analysis and Medicare audits.

Find the best lawyer for your project

Browse Lawyers Now

Quick, user friendly and one of the better ways I've come across to get ahold of lawyers willing to take new clients.

View Trustpilot Review

Need help with a Business Purchase Agreement?

Create a free project posting
Clients Rate Lawyers 4.9 Stars
based on 11,588 reviews
CONTRACT LAWYERS BY TOP CITIES
See All Corporate Lawyers
DUE DILIGENCE LAWYERS BY CITY
See All Due Diligence Lawyers

Contracts Counsel was incredibly helpful and easy to use. I submitted a project for a lawyer's help within a day I had received over 6 proposals from qualified lawyers. I submitted a bid that works best for my business and we went forward with the project.

View Trustpilot Review

I never knew how difficult it was to obtain representation or a lawyer, and ContractsCounsel was EXACTLY the type of service I was hoping for when I was in a pinch. Working with their service was efficient, effective and made me feel in control. Thank you so much and should I ever need attorney services down the road, I'll certainly be a repeat customer.

View Trustpilot Review

I got 5 bids within 24h of posting my project. I choose the person who provided the most detailed and relevant intro letter, highlighting their experience relevant to my project. I am very satisfied with the outcome and quality of the two agreements that were produced, they actually far exceed my expectations.

View Trustpilot Review

Need help with a Business Purchase Agreement?

Create a free project posting
Clients Rate Lawyers 4.9 Stars
based on 11,588 reviews

Want to speak to someone?

Get in touch below and we will schedule a time to connect!

Request a call

Find lawyers and attorneys by city