Due Diligence and the Business Transaction: Getting a Deal Done
Jeffrey W. Berkman
Format: PDF / Kindle (mobi) / ePub
Due Diligence and the Business Transaction: Getting a Deal Done is a practical guide to due diligence for anyone buying or selling a privately held business or entering into a major agreement with another company.
When you’re buying a business, it’s wise to conduct due diligence. That's the process of investigating and verifying the firm’s finances, labor record, exposure to environmental issues, store of intellectual property, hard assets, ownership structure, and much more. If you don’t, you may later stumble into serious, costly problems, or you may pay an inflated price for the business. This book not only shows you how to conduct such an examination and what to look for, but it will also help you uncover hidden issues that some sellers might not want you to know about.
Conversely, this book shows smart business sellers how to conduct due diligence on their own firms to arrive at the right sales price, uncover issues that might scare off buyers or investors, solve lingering problems before a sale, and more. Done right, due diligence can help sellers ensure they sell the business for the best price and with the least risk. Due Diligence and the Business Transaction will help you understand when to conduct due diligence, whom to include, and how to spot the red flags that signal danger. In addition, you will learn:
- How to conduct due diligence when contemplating a joint venture, business loan, franchise opportunity, or manufacturing deal
- How to calibrate the correct scope and breadth of the due diligence investigation depending on your situation
- How the results of due diligence may and often will change the elements of the final deal
- How to draft due diligence documents so they protect your interests
- What successful deals look like
Corporate attorney and due diligence expert Jeffrey W. Berkman interweaves critical action points, guidelines and procedural steps, case studies, and due diligence questionnaires, checklists, and documents. The veteran of many business deals, Berkman's advice will help you avoid business-crippling mistakes and make the best deal possible.
terminate the transaction or demand substantial changes to deal terms. 52 Chapter 4 | Tailoring Due Diligence to the Transaction The purpose of this chapter is to demonstrate how the nature and terms of the proposed business deal affects directly how you draft a due diligence questionnaire. First, it examines a variety of business transactions and the information that is almost always sought in the context of the specific type of deal, such as an asset purchase or a loan or a licensing
the purchaser; (iii) the examination conducted by the purchaser through the due diligence questionnaire, professional advisors, and consultants; and (iv) the property inspection. 71 72 Chapter 4 | Tailoring Due Diligence to the Transaction The Partnership Recurring to the partnership case study, remember that the buyer is considering the purchase of a 50% interest in an LLC that is a music store. The material facts of the partnership are as follows: Nature of the transaction: purchase of a
loan if due diligence disclosed that the borrower did not own the assets offered as collateral for the transaction. If it is discovered that the borrower does not own the assets, the lender has no security for the loan in the event of a default. • A deal involving the purchase of a business, whether structured as an asset sale or as a stock purchase deal, obviously cannot proceed if the seller does not own the material business assets (Case Studies 2 and 3). Due Diligence and the Business
grant a worldwide patent license without securing a waiver of the option. Rights of first refusal are often granted investors in private-equity financing transactions as further consideration for an investor’s participation in early financing rounds. In addition, owners of a class of preferred stock may have obtained the right to approve the terms of any subsequent offerings below a certain valuation to prevent excessive dilution of their ownership interest. The failure of to obtain the approval
and unwind the entire deal. Moreover, the existing partners may object to a redemption right because the investor would essentially reduce her investment risk at the expense of the other partners. From the investor’s perspective, the main concern is ensuring the company can, in fact, honor the redemption commitment. Investor: Are there any other major issues we need to talk about? Attorney: There are some less important financial and legal issues, but we are already addressing those with