Due diligence or acquisition audit is an irreplaceable and crucial step during the transfer of business. It is also very often a step that is neglected or rushed. Thus there are many disputes that can occur surrounding audit acquisition. Therefore, when audit acquisition is taking place, it is necessary to contact a lawyer who is well informed in problems concerning the transfer of business and who will have the power to resolve any of these sorts of conflicts.
What is an acquisition audit?
Before taking over a company, any informed buyer will carry out an acquisition audit of the company in order to evaluate the performance and the profitability of the company. This is also the occasion to gather any essential information that may reinforces or discourages the buyer from proceeding.
There will be various sort of audits: tax audit, social audit, accounting audit, environmental audit, risk audit, legal audit, audit of activity (supplier relationships, study of existing contracts) … It is obvious that to undertake a “full audit” is complex yet necessary, thus it is advised that one employs well informed professionals. It is this audit that forms the basis upon which all negotiations regarding price guarantees (specifically assets and liabilities guarantees), and the overall protocol of the transfer of business will be undertaken.
Disputes related to due diligence
Disputes can appear at two different phases: while studying the enterprise, or after this stage. The audit acquisition or due diligence is an actual diagnostic of the enterprise. However, the objectives of the seller and buyer are contradictory. The seller is looking to minimize weaknesses, while the buyer looks to discover and explore these hidden areas.
The goal for the buyer is to limit risks by reducing information asymmetries related to the transferor, who evidently knows his or her own company well. In effect, there can often be conflict over how to proceed and over the results obtained, etc.
The best solution is to call a lawyer who is experienced in matters concerning the transfer of business. This lawyer will not be emotionally attached to the sale in any way and will not change their opinions because of sentiment or feelings. Thus the audit will remain completely neutral throughout the entire process.
In addition, litigation can become necessary when the acquisition audit is carried out badly. In this case the negotiations hinge on a less solid base (information asymmetries are of the most importance here) often leading the buyer to feel tricked in the sale. A bad audit can also have disastrous consequences, bringing about disputes after the transfer of business or causing a postponement of the sale.
The Role of the Lawyer
The lawyer plays an important role from the beginning. The lawyer with expertise in the transfer of business acts as a privileged interlocutor, and can complete the audit because of his or her multiple qualifications. Therefore, the intervention of a lawyer considerably reduces the risk of disputes post-transfer.
Besides this, the lawyer will play an important part in negotiations regarding due diligence. Whether on the side of the transferor or the transferee, the lawyer allows for the optimal transfer of business. Finally, the lawyer can allow you to negotiate in a way that is honest and transparent, allowing you to avoid conflict. PICOVSCHI lawyers are here and ready to use their strong experience and expertise to help you with your situation.