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What are some common due diligence activities? Part one

In a typical merger or acquisition in New Jersey, the company seeking to buy another company will do a good deal of due diligence before the purchase goes through. After all, the buying company wants to make sure what obligations and liabilities it will be undertaking by buying the target company, as well as what the target company has to offer. This series of blog posts will go over some common due diligence activities that a buying company may undertake during a merger or acquisition.

First of all, the buyer will want to understand the target company's financial history, as well as it's prospective performance. The buyer will also want information about the intellectual property and technology they will be obtaining through the merger or acquisition, and if there are any intellectual property legal disputes.

Furthermore, the purchasing company will also want information about who the target company's largest customers are. It will want to know what revenue the target company's top customers generate. If there are any issues regarding the employees or management of the target company, the buyer will also want to know about this.

In addition, although it takes some time to go through, the buyer will want to go over all of the target company's material contracts. The buying company will also want to know if the target company has gone through litigation in the past, or if there is any pending litigation.

Tax matters are also important for the purchasing company to know about. The buyer will also want to make sure to assess what the antitrust or regulatory issues regarding the purchase would be.

The buyer will also want to ensure that the target company will be a good fit with it. Moreover, one other aspect of due diligence the buyer will want to perform is an assessment of any insurance policies the target company has.

These are only a few issues that a purchasing company may want to go over when pursuing its due diligence with regard to a potential merger or acquisition. The next post in this series will go over some more due diligence activities that might be appropriate in a merger or acquisition. In the meantime, business owners considering a merger or acquisition may want to contact an attorney for help in understanding what due diligence activities they should undertake prior to completing one of these complex business transactions.

Source: Forbes, "20 Key Due Diligence Activities In A Merger And Acquisition Transaction," Richard D. Harroch and David A. Lipkin, Accessed on Nov. 6, 2016

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