This presentation gives an in-depth look at the comprehensive due diligence process. It covers the framework for due diligence, its purpose, and types. This presentation is incrediably valuable for anyone doing or looking to do transactional work.
5. Different purposes for due diligence
• some due diligence is “target” focused, this type of
investigation attempts to address the risks and or issues
regarding what is being acquired
– e.g. existence of loan agreement
• transactional due diligence addresses the risks and or issues
concerned with getting the deal done
– e.g. loan agreement requires consent of bank for transaction
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7. Due diligence expectations
• Time and cost constraints will often be important factors for
clients and counsel
• It is important to establish reasons for the parts of the due
diligence process at the outset
• Denote specific expectations and processes to be carried out,
and specific reasons why certain processes and searches will
not be carried out
• These due diligence expectations and processes should be set
out in writing for both counsel and client and should be re‐
assessed as new information is learned and evaluated
throughout the process
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8. What is a due diligence framework?
• A due diligence framework proposes a structured approach to
due diligence investigations which attributes clear deadlines
and informational objectives
• A due diligence framework process apportions responsibility to
different people and or groups who work as a collective team
to pool the information from the related due diligence
investigations
• A due diligence framework carefully sets out what the
necessary steps to the due diligence work
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9. What is a due diligence framework?
Here is an example of a suggested due diligence framework
for biotech companies interacting with large pharmaceutical
companies. It is basic and relevant to the coordination of any
due diligence work
1. Knowing what you "need" to know
2. Assembling the due diligence team
3. Preparing the “target” for the diligence event
4. Managing interactions between firms
5. Using the collected information to create value in both firms
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12. What is a due diligence framework?
2. Assembling the due diligence team
• The due diligence team is important to the transaction
because the team will be directing the strategic analysis of
the target or transaction, they may also be interacting with
the ‘target’ which is an opportunity to create a more positive
relationship
• Industry knowledge, experience carrying out due diligence
investigations, and an awareness of roles, responsibilities and
deadlines for the due diligence work are all important factors
to consider when choosing the due diligence team members
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14. What is a due diligence framework?
3. Preparing the “target” for the diligence event
• Deciding with the “target” what data is needed for
assessment, how it will be collected and for what purposes,
who will have access to it, and where it will be stored
• Denoting these specifications at the outset helps the due
diligence process run smoothly
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15. What is a due diligence framework?
4. Managing interactions between firms
• “target” focused due diligence and transaction focused due
diligence investigations occur at very sensitive periods and
often involve sensitive and confidential information
• A need to balance between sharing proprietary information
and the knowledge that the deal may not occur
• Important to clearly define of roles and responsibilities of
staff, actions for each stage of the process and information
upload goals for a data room
• Must have clear understanding of the management process
of the data room
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17. What is a due diligence framework?
5. Using the collected information to create value in both firms
• Information gleaned from the due diligence investigation can
be valuable to both parties because the information and
issues found can be addressed prior to a deal, and/or included
and indemnified in the closing agreements
• Due diligence can lead to less reliance on Representations and
warranties and a clearer idea of
1) The general state of the business;
2) The way the business has been run in the past;
3) Whether the business has been operated according to industry
standards or in a unique fashion because of certain factors,
rights or assets that the purchaser may or may not acquire;
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