Automating Legal Documents for Due Diligence

A legal due diligence review is more than the legal equivalent to kicking the tires of the car. It is a thorough investigation that uses lawyers and CPAs to confirm documentation and data. It involves a comprehensive review of various areas, including a legal review which includes contracts, litigation liabilities and intellectual property and corporate records and regulatory compliance, an audit of financials that includes accounting policies, financial statements and tax returns. It also involves an operational review of the business’s management, organizational structure, sales, products, marketing facilities and equipment, supply chain, customer relations sales and distribution channels, and competition.

Depending on the amount of the deal and how complex the company is, the legal due diligence process can be extremely time consuming, particularly with large public companies which have virtual piles of information for lawyers to sort through. Many legal departments are using technology to simplify the process. For instance, a document review platform coupled with AI tools.

Set up a framework for your investigation and establish a target before you begin the legal due diligence. It is beneficial to make a checklist with key areas to be covered and to get the legal team to agree on a strategy with the business owner. It is also crucial to prioritize which areas require expert input from the firm. For example legal due diligence review of an IP holding company might include questions from an intellectual property specialist to determine whether the company is in possession of any significant patents or other intellectual property rights and whether there are any infringement lawsuits in the process or being considered.