Has Due Diligence Created an Opportunity to Improve the Deal Terms?

Jeffrey W. Berkman

Chapter Chapter 6 in Due Diligence and the Business Transaction, 2013, pp 93-128 from Springer

Abstract: Abstract An overarching theme of the due diligence investigation is an attempt to verify the business story as told by the seller, potential partner, or the company seeking financing (hereafter, “the seller”). Chapter 5 discussed examples of how the discovery of certain types of legal issues results in termination of a proposed deal because they undermine the business story. Some deals fail because they are legally impossible to complete or simply too risky, costly, or uninteresting from a financial or business standpoint. Not all issues discovered during the due diligence process end in termination of a proposed transaction, however. Rather, there are usually financial, legal or business solutions that can remedy the issue or issues. For the party conducting the due diligence investigation (hereafter, “the buyer”), the discovery of information challenging a seller’s story can create an opportunity to renegotiate financial or legal terms, or aspects of the proposed deal, or may to require the seller to make changes to its business operations. Any solution proposed by a buyer must still be acceptable, of course, to the seller. In many cases, however, the seller may have no choice but to accept revisions to the original deal terms if it wants the transaction to proceed. This chapter explores common due diligence issues that can create an opportunity for the party conducting the due diligence investigation to negotiate more favorable financial terms, deal structure, or rights when the other party is motivated to move forward with the deal done.

Keywords: Corporate Governance; Purchase Price; Equity Holder; Commercial Real Estate; Customer Information (search for similar items in EconPapers)
Date: 2013
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DOI: 10.1007/978-1-4302-5087-6_6

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