Abstract
The previous chapters examined the role of the due diligence process in a business transaction, the importance of preparing a due diligence plan as a road map for the investigation, and formulation of the due diligence questionnaire, which should include standard questions common to almost all business transactions, and deal-type and deal-specific questions that depend on the nature and terms of the proposed business deal. Although the target company hopes no negative issues are discovered, due diligence can uncover a variety of issues. Some can be resolved with a relatively easy financial or legal fix, others by renegotiation of the deal terms, and still others are so serious that termination of the proposed transaction may be the only option.
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Notes
- 1.
As discussed in Chapter 9, a nonbinding letter of intent or memorandum of understanding often precedes a binding agreement.
- 2.
As discussed in Chapters 6 and 8, material due diligence often can be resolved. For instance, in this case, the lender’s funds could be used to satisfy the existing lien. On the other hand, if the lender intended the loan for a specific purpose, such as the development of a software application, use of the loan funds for a different purpose is not a solution.
- 3.
One solution, which is discussed in Chapter 8, is to obtain an indemnification from the seller. Leaving aside the question of the seller’s ability to meet the financial obligations of the indemnification, the remediation could be so disruptive to the other tenants or so extensive that it renders indemnification meaningless.
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© 2013 Jeffrey W. Berkman
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Berkman, J.W. (2013). A Material Legal Issue Can Kill the Deal. In: Due Diligence and the Business Transaction. Apress, Berkeley, CA. https://doi.org/10.1007/978-1-4302-5087-6_5
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DOI: https://doi.org/10.1007/978-1-4302-5087-6_5
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Publisher Name: Apress, Berkeley, CA
Print ISBN: 978-1-4302-5086-9
Online ISBN: 978-1-4302-5087-6
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