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Due Diligence and the Business Transaction: Getting a Deal Done

Book Description

Due Diligence and the Business Transaction: Getting a Deal Done is a practical guide to due diligence for anyone buying or selling a privately held business or entering into a major agreement with another company.

When you're buying a business, it's wise to conduct due diligence. That's the process of investigating and verifying the firm's finances, labor record, exposure to environmental issues, store of intellectual property, hard assets, ownership structure, and much more. If you don't, you may later stumble into serious, costly problems, or you may pay an inflated price for the business. This book not only shows you how to conduct such an examination and what to look for, but it will also help you uncover hidden issues that some sellers might not want you to know about.

Conversely, this book shows smart business sellers how to conduct due diligence on their own firms to arrive at the right sales price, uncover issues that might scare off buyers or investors, solve lingering problems before a sale, and more. Done right, due diligence can help sellers ensure they sell the business for the best price and with the least risk. Due Diligence and the Business Transaction will help you understand when to conduct due diligence, whom to include, and how to spot the red flags that signal danger. In addition, you will learn:

  • How to conduct due diligence when contemplating a joint venture, business loan, franchise opportunity, or manufacturing deal

  • How to calibrate the correct scope and breadth of the due diligence investigation depending on your situation

  • How the results of due diligence may and often will change the elements of the final deal

  • How to draft due diligence documents so they protect your interests

  • What successful deals look like

Corporate attorney and due diligence expert Jeffrey W. Berkman interweaves critical action points, guidelines and procedural steps, case studies, and due diligence questionnaires, checklists, and documents. The veteran of many business deals, Berkman's advice will help you avoid business-crippling mistakes and make the best deal possible.

What you'll learn

  • The nature and purpose of due diligence

  • When you need to perform due diligence

  • Why it is important for sellers of a business or issuers in private placements to conduct due diligence before going to the market

  • How to scale the scope and breadth of due diligence, depending on the nature of the transaction

  • Who you need to involve when conducting due diligence

  • How to find landmines that may otherwise come back to wreck the business you just bought

  • How to best use the knowledge you gain through due diligence

Who this book is for

Due Diligence and the Business Transaction is for business people or organizations who are buying, selling, or investing in a business or engaging in joint ventures with other companies. It will help them understand how to gain critical information and use it wisely to get the best deal possible.

Table of Contents

  1. Title Page
  2. Apress Business: The Unbiased Source of Business Information
  3. Dedication
  4. Contents
  5. About the Author
  6. Preface
  7. CHAPTER 1: Introduction
    1. Due Diligence: Critical in a Business Transaction
  8. CHAPTER 2: What Is Due Diligence?
    1. Due Diligence Defined
    2. Due Diligence: A Fundamental Aspect of Most Business Transactions
    3. The Goal of Due Diligence: Understanding the Business Cornerstones
    4. Creating the Due Diligence Plan
  9. CHAPTER 3: The Due Diligence Questionnaire
    1. Due Diligence Questions: Standard Questions
    2. Conclusion
  10. CHAPTER 4: Tailoring Due Diligence to the Transaction
    1. Due Diligence: Common Questions Based on Deal Type
    2. The Financing Transaction
    3. The Asset Sale
    4. The Business Buyout
    5. The Private Placement
    6. The Commercial Real Estate Transaction
    7. The Partnership
    8. The Material Contract
    9. Conclusion
  11. CHAPTER 5: A Material Legal Issue Can Kill the Deal
    1. Legality and Compliance with the Law
    2. Ownership Issues Relating to Assets
    3. Encumbrances
    4. Third-Party Rights
    5. Lawsuits and Judgments
    6. Employment and Personnel
    7. Structural Issues
    8. Intangible Issues
    9. Conclusion
  12. CHAPTER 6: Has Due Diligence Created an Opportunity to Improve the Deal Terms?
    1. Is the Other Party a Motivated Seller?
    2. Unsupportable Valuation Assumptions
    3. Operational Issues That Can Undermine Assumptions about the Business
    4. Personnel Issues
    5. Concerns Related to Corporate Structure
    6. Additional Issues Relating to Governance
    7. Conclusion
  13. CHAPTER 7: Applying Due Diligence Principles: The Franchise Purchase
    1. The Franchise Purchase (Case Study 8)
    2. Creating the Due Diligence Plan for This Transaction
    3. Creating the Due Diligence Questionnaire
    4. Where Do You Go from Here?
  14. CHAPTER 8: Resolving the Issues
    1. At What Point during the Transaction Should Due Diligence Commence?
    2. Exclusivity
    3. Due Diligence Provisions
    4. Resolving Due Diligence Issues
    5. Preclosing Conditions
    6. Postclosing Covenants
    7. Summary
  15. CHAPTER 9: The Due Diligence Process and Pragmatic Considerations
    1. Should the Parties Execute a Letter of Intent before Due Diligence?
    2. What Factors Determine the Scope of the Due Diligence Investigation?
    3. Who Should Be Part of the Due Diligence Team?
    4. What Kind of Research Should Be Conducted Separate from the Due Diligence Questionnaire?
    5. What Self-Imposed Due Diligence Should Be Conducted by the Seller?
    6. Conclusion
  16. APPENDIX A: Due Diligence Plan for KMF Franchisee, LLC, Investment
    1. I. Transaction Overview
    2. II. The Company
    3. III. The Business Operation
    4. IV. Business Valuation
    5. V. Personnel
  17. APPENDIX B: Due Diligence Questionnaire for KMF Franchisee, LLC
    1. I. Corporate Organization
    2. II. Corporate Ownership Structure
    3. III. Financing Obligations
    4. IV. Financial Information
    5. V. Tax Matters
    6. VI. Contracts, Agreements, and Commitments
    7. VII. Intellectual Property and Technology
    8. VIII. Information Technology Systems and Networks
    9. IX. Privacy and Data Security
    10. X. Real Property
    11. XI. Personnel and Employment
    12. XII. Litigation and Claims/Legal Compliance
    13. XIII. Environmental Matters
    14. KMF Franchisee, LCC Personal Questionaire
  18. APPENDIX C: Due Diligence Questionnaire for Overlook, Inc.
    1. I. General Corporate Background
    2. II. Financial Information
    3. III. Litigation and Claims/Legal Compliance
    4. IV. Insurance
  19. APPENDIX D: Due Diligence Questionnaire for ABB, Inc.
    1. I. Corporate Organization
    2. II. Financial Matters
    3. III. Tax Matters
    4. IV. Contracts, Agreements, and Commitments
    5. V. Intellectual Property and Technology
    6. VI. Information Technology Systems and Networks
    7. VII. Privacy and Data Security
    8. VIII. Litigation and Claims/Legal Compliance
  20. Index