In all our years handling mergers and acquisitions, we are often surprised—and sometimes disappointed—by how often parties fail to conduct proper and extensive due diligence. This oversight is not limited to buyers; sellers, investors, lenders, and other transaction participants should also prioritize due diligence to protect their interests.

Beyond the Basics: What Due Diligence Really Means
Many people associate due diligence strictly with a purchaser’s review of a transaction. However, relying solely on seller representations, warranties, or insurance policies can be a risky gamble. If a purchaser depends on Representation and Warranty Insurance without conducting a detailed review, they may find themselves facing losses that could have been prevented.

Due diligence is, at its core, an audit—an essential process for verifying income, expenses, assets, liabilities, and operational risks. While tedious and time-consuming, there is simply no substitute for this level of scrutiny. A structured, checklist-driven approach that integrates expertise from multiple disciplines, including accounting, legal, insurance, and technical operations, is crucial.

Mitigating Risks: Why Cutting Corners Isn’t an Option
A common challenge in due diligence is the limitation of time and resources. While some trade-offs may be necessary, the importance of getting it right cannot be understated. Unwinding a transaction is often difficult, if not impossible, and proving damages can be both complex and costly. The adage “measure twice, cut once” has never been more relevant.

The Role of a Solid Agreement
A well-structured legal agreement—whether an asset purchase agreement, stock purchase agreement, or merger agreement—should go hand in hand with thorough due diligence. While contracts outline representations, warranties, and remedies for breaches, a strong due diligence process significantly enhances a buyer’s ability to assess risks and enforce claims when necessary.

Partner with Experienced Professionals
Conducting due diligence isn’t just about checking boxes—it’s about securing the integrity of your deal. Engaging experienced professionals and following a methodical approach will help mitigate risks and protect your investment. At Weis Burney, we specialize in comprehensive due diligence strategies that ensure our clients enter transactions with confidence.

If you’re preparing for a deal, let’s talk. We’re here to help you navigate the complexities of mergers and acquisitions with clarity and expertise.

The foregoing is intended to be marketing material. Information is contained in this article is for general education and knowledge. It is not designed to be and should not be substituted for legal advice. This information is not intended to create an attorney-client relationship.