The Growing Significance of Due Diligence vis-à-vis M&A Transactions: Overviewing its Scope, Checklist, and Red Flags

The term ‘due diligence’ is so commonly used in legal parlance. Black’s Law Dictionary defines this concept as a ‘measure of assiduity or prudence, something that is circumstantially expected and is ordinarily exercised by a person who is prudent/reasonable’. Since this paper aims to connect due diligence with M&A, it is crucial to establish that a merger is an amalgamation of two companies and, acquisition refers to when one company purchases another company’s entire/partial shares to further control the latter. In this context, due diligence would include the procedure of investigating any person or business prior to entering into a contract with them. Not only does such diligence enable the consumer to crosscheck all legitimate information about the targeted company, but aids in laying the groundwork whilst simultaneously eliminating the obvious risks and loopholes. The researcher aims to first, cover M&A vis-à-vis due diligence broadly. Secondly, to study pre-due diligence and post-due diligence for potential red flags. Lastly, highlight solutions to tackle litigation risks. How does one become more diligent? What should one initially review before contracting with another? These elements will form the essence of the following paper.