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What is a due diligence checklist template?

A due diligence checklist template is essential for attorneys and legal departments involved in significant transactions such as a merger and acquisition (M&A) process. Having a checklist, timeline, or model form gives attorneys an organized and efficient document to help collect, understand, and assess all information received during both simple and complex legal processes.

What due diligence resources are available?

There are countless due diligence resources available to help attorneys and legal teams plan and execute legal tasks at both state and national levels. These documents help eliminate unnecessary delays, allowing for better client service and more effective legal guidance. 

  • Checklists map out step-by-step processes for attorneys, helping to ensure that every step of a legal process is detailed. Checklists can range from simple corporate maintenance issues to major acquisitions of products or businesses.
  • Model forms are exactly as they sound: templates used to make routine legal tasks easier and more efficient. These can include stock purchase agreements, merger and asset purchase forms, LLC and stockholder agreements, and any number of organizational documents.
  • Practice notes and legal updates guide attorneys and keep them up-to-date on general corporate law topics such as public and private mergers, stock and asset acquisitions, as well as relevant case law. 
  • Access to legal insiders and subject matter experts is also critical. Tapping into the collective knowledge and experience of reference attorneys allows for greater insights and an ability to solve problems before they present themselves.

Why should I use a due diligence checklist template during an M&A process?

A checklist, template, or other model form bring clarity and efficiency to the M&A process, giving the attorney or legal team leading an opportunity to understand the target corporation and the way it operates. This is helpful in many ways.

  • First, the buyer gets a clear picture of how the target company does business. This top level, big picture look at the target company is beneficial for maintaining transparency during the overall process of acquisition, but is also useful to attorneys who will be in charge of both companies before and after the process is complete.
  • Due diligence also helps determine the value of a company, which will direct the amount that is offered and eventually paid during the acquisition. This value determination occurs by examining obvious data, such as products, place in the market, cash flow, and balance sheets. However, it also takes into account information gained through employee interviews, document evaluation, and any active lawsuits or insurance settlements. This adds to the big picture assessment of the company and the merger.
  • Finally, legal due diligence – despite its tediousness – makes the M&A process go faster by helping identify relevant documentation and work through any legal or regulatory problems before they snag the acquisition. Using model forms, checklists, practice notes and updates, and tool kits keeps attorneys on top of trends in corporate M&A procedures.

How does a due diligence compliance checklist help attorneys?

A due diligence checklist template makes any legal process – from simple to complex – smoother and will decrease the workload of legal teams, mitigating risks during and after the task.

  • Using a checklist helps attorneys establish a big picture, understanding the acquisition and both companies in a way that allows for concise descriptions of what is at stake and what the purchase hopes to achieve. A template takes the guess work out of such complex work, streamlining and optimizing the process.
  • After these initial steps, a template or checklist will help attorneys identify, organize, and complete any documents or interviews needed. This can include organizational files, contracts, employee benefits materials, and anything else that can help establish a company's value. 
  • As the process ends, a checklist or template helps the acquiring company look over its work and determine if there are any holes that require more information or investigation. As the benefit of legal due diligence is mainly for the buyer, using legal checklists safeguards against missing any essential information.

When can I use a due diligence checklist template?

A checklist, template, or flowchart is useful in almost any legal situation where an attorney wants to control the process or workflow. Besides obvious topics such as financial information and strategic fit, a template can shed light on numerous other issues. These include:

  • Gathering information on employee plans, such as health insurance, disability, severance plans, retirement plans, or any stock purchase or incentive plans. This is especially important during an M&A process, where the purchasing corporation needs to know what plans the target corporation offers its employees.
  • Additionally, general corporate matters such as charter documents, board members, security holders, and the minutes of stockholder and board of director meetings are necessary to the acquisition process. This, of course, can be time-consuming, eating up work hours very quickly. A template or checklist helps streamline the information, making sure legal teams stay on track and investigate only the information they need.
  • Finally, a due diligence checklist or template can help a target company get further intelligence on competitors. The buyer will have access to the target company's current and anticipated competitors, which may be new data. This allows the buyer to immediately determine the advantages and disadvantages of the company's products and technologies.
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