When acquiring a business, excitement can build quickly, but smart buyers know that before signing the final agreement, there’s one critical step: due diligence.
At Hadri Law, we guide our clients through legal, financial, and operational due diligence to uncover hidden risks and validate key assumptions. It’s not just about confirming the value of the target; it’s about protecting your investment.
What Is Due Diligence?
Due diligence is a structured investigation into the business being acquired. It allows the buyer to:
- Verify ownership of key assets
- Assess financial health and liabilities
- Understand operational risks
- Ensure compliance with legal and regulatory obligations
- Uncover deal-breaking red flags before it’s too late
What Should Buyers Always Review?
Here are the essential areas we recommend reviewing in every deal:
1. Corporate Records
- Articles of incorporation and amendments
- Shareholder registry
- Resolutions and bylaws
- Minute book completeness
2. Financial Information
- Audited financial statements and tax returns (3+ years)
- Working capital levels
- Debt and liabilities
- Revenue breakdown and customer concentration
3. Contracts
- Major customer and supplier agreements
- Lease and rental contracts
- Licensing or franchise agreements
- Loan and credit facilities
- Termination and change of control clauses
4. Employment & HR
- Employee list with roles and compensation
- Employment agreements and offer letters
- Independent contractor arrangements
- Severance policies and termination risk
- Compliance with employment standards legislation
5. Intellectual Property
- Trademarks, patents, copyrights
- IP ownership and assignments
- Software licensing or development agreements
- Infringement or IP litigation history
6. Litigation & Insurance
- Current or pending lawsuits
- Regulatory inquiries
- Insurance policies and claims history
- Risk coverage and exclusions
7. Regulatory & Compliance
- Business licenses and permits
- Privacy law compliance (e.g. PIPEDA)
- Environmental and health & safety matters
- Industry-specific regulatory obligations
Red Flags That Can Kill a Deal
- Undisclosed liabilities or tax exposures
- Heavily concentrated revenue from one client
- Lack of proper employee documentation
- Expired or non-transferable licenses
- Unregistered IP critical to operations
At Hadri Law, we help you distinguish between a manageable risk and a fundamental issue that warrants walking away or renegotiating the deal.
How Hadri Law Supports You
We don’t just collect documents, we interpret them. Our legal due diligence services include:
- Custom due diligence checklists
- Review and risk assessment of corporate, commercial, and employment documents
- Coordination with accountants and financial advisors
- Reporting on issues that require resolution before closing
- Drafting or updating key agreements post-closing
Final Thoughts
Due diligence isn’t just a formality; it’s your chance to look under the hood. Identifying risks early allows you to negotiate more effectively, adjust the price, or walk away if necessary.
For trusted legal guidance, contact Hadri Law at 437‑397‑2374, email contact@hadrilaw.com, or book your free consultation today.