What is “Due Diligence” or “Legal Review”

In practice, the process called due diligence refers to the legal examination of the target company, especially in mergers and acquisitions. In this process, the partnership structure of the target company, its commercial relations and contracts to which it is a creditor or debtor, legal disputes to which it is a party, and its compliance with the legislation it is subject to, both in general and according to the sector in which it operates, are discussed in various matters.

Nowadays, due diligence takes place in the form of the target company transferring the information and documents in the question list sent to it to a data room, and the examination being carried out by the lawyers over these information and documents.

This stage of the merger-acquisition process is important in terms of revealing the characteristics and problems arising from the partnership structure of the target company, determining its rights and obligations, and therefore determining the transaction price. The picture appearing in the due diligence report may also result in the buyer abandoning the transaction, depending on the place.