Investors look first at revenue and profit, but the risks that damage an investment rarely appear in the accounts: unresolved litigation, long-term contractual commitments, intellectual property registered to someone other than the company, and tax exposure not yet assessed.
Diligence opens those up before signature. The output is not only whether to invest. It is also the basis for adjusting the price, and for the warranties the seller has to give.
We do this work alongside the auditor in the same office, so the legal and the financial review run together.
What the review covers
- Registered status, beneficial shareholding and the authority of the signatories.
- Litigation the business is party to, as claimant and as defendant.
- Material contracts, particularly change-of-control clauses that let a counterparty walk away.
- Licences the business must hold, and whether they survive a change of shareholder.
- Whether intellectual property is registered to the company or to an individual.
- Employee liabilities, both accrued severance and open disputes.
- Unpaid tax and positions exposed to assessment.
What the investment agreement should fix
- The seller's warranties that the information given is accurate, and what follows if it is not.
- Conditions to be satisfied before the shares transfer.
- A retention held back for a period against liabilities that may surface.
- The investor's rights over major decisions and access to information.
- The exit: how it happens and how value is calculated.
This page is general information, not advice on your transaction. The scope of a review is set by the size and nature of the target.