What is due diligence and why are such processes important?
A due diligence process is a review of the company/a company control that is required in the event of a restructuring, issue, sale of a company or when assessing new strategic partners. To get as comprehensive a picture of the company as possible in order to make the right decision.
In due diligence, the company usually has to present the accounts, contracts, bonus agreements, patent certificates and more in a report to external parties. The documentation submitted will be assessed and analyzed to understand how the company is doing. Such processes can affect both the pricing of the company and whether there is an agreement at all.
When is due diligence required?
Due diligence is required when an agreement in principle has been agreed, but before the contracts are signed and the deal is closed. The outcome of the due diligence process itself will determine whether the transaction can continue as planned, whether renegotiation is necessary first or whether the agreement should be terminated.
Who carries out the company audit?
Usually an independent consultant, accountant, lawyer or corporate broker will carry out the control of the company.
How long does a due diligence process take?
One of the questions we most often get is how long a company review can take, and the answer is anywhere from 30 days to 6 months. DD processes come in all shapes and forms, and there are also faster and simpler variants. How long the process takes depends on the company's size, type and the complexity of the agreement itself. The right composition of advisers and experts in such processes are important for an effective review.
Is there a need for advisers in a due diligence process?
In order to carry out a comprehensive company audit, the various parties will usually need to hire external advisers and experts. Lawyers, corporate finance, tax advisers, auditors and technicians usually participate in the process.
For the internal parties, it is important to have advisers who find the right buyers and negotiate the best conditions. For the external parties, a careful review is essential to uncover the state of the company and any risks and problems, but also opportunities.
Which legal factors are important to watch out for?
Before the deal is closed, it should be clarified whether the following is or will be an issue:
The due diligence process should clarify whether there are circumstances that could prevent the sale or later create problems for the external parties who enter the company after the deal has been closed. When transferring shares, questions about pre-emption rights under the Companies Act, shareholder agreements or articles of association must also be clarified.
In addition, it must be clarified whether the sale requires consent from the company's contractual parties. In such cases, it is important to have a dialogue and that all clarifications take place a head of the sale. This also applies internally if there are special consent requirements from the board.
In the case of bank financing, it must be clarified at an early stage what is required of security and whether it is possible to establish comprehensive security. Disagreements in priority and security permission can easily create fertile ground for delays and the actual completion of the handover.
In order for both parties to avoid tax shocks and unnecessary tax costs, it should be clarified how the transfer will result in tax terms for both seller and buyer. The parties should also clarify whether the rules on publication of information will come into force, i.e. whether there will be, for example, an obligation to report to Oslo Børs.
What is a virtual computer room used for?
A computer room is tailored to streamline due diligence processes. In connection with buying, selling and investing, it is important to have efficient, secure and clear document flow with all parties. With a digital data room, you can store, structure and share sensitive documents safely and easily with external parties.
In Adminflow, you can easily upload the relevant documents continuously. You share the necessary information in the computer room and set limits yourself on who can see the contents of the folder. Adminflow ensures that all sensitive material can be safely shared with external parties. Both when it comes to national and international company transactions.
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