Conducting a legal due diligence review in a private equity buyout transaction
Conducting a legal due diligence review in a private equity buyout transaction

The following Corporate practice note provides comprehensive and up to date legal information covering:

  • Conducting a legal due diligence review in a private equity buyout transaction
  • Reviewing contracts
  • Finding a suitable precedent
  • Reviewing corporate documentation
  • Searching public registers

This Practice Note is part of the Lexis®PSL Corporate private equity buyout transaction toolkit.

Conducting due diligence will involve reviewing documents made available by the seller in a data room or sent to the private equity investor for review. This will usually include reviewing various types of contracts (which may be of a specialist nature), as well as various records, ledgers and lists. The corporate lawyer will always be involved in reviewing corporate documents on a private equity buyout (MBO) transaction, such as the target company's articles of association and statutory books and records.

Due diligence should always also include conducting searches of public registers, such as Companies House and HM Land Registry. The disclosure letter will be likely to include general disclosures of information contained in such public register searches (the investor should insist that these searches are actually made, rather than accepting information that would have been discovered if a search had been made).

The investor 's legal due diligence will generally focus on the following issues:

  1. title (seller's title in sale shares, as well as title to key assets, property and rights)

  2. licences and consents (existence and continued availability of licences, permissions and consents required to carry on the business)

  3. material contracts (whether there are any unusual contractual terms in key contracts with main customers/suppliers, especially price/payment and term/termination)

  4. change of control (whether the

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