Due diligence

When addressing the issue of M&A transaction in Ukraine we strongly recommend to provide legal and financial Due Diligence of M&A targets. The main purposes of the Due Diligence procedure are, certainly, to receive true and impartial information and data with regard to a target company, to make an unbiased appraisal of the target company, including its assets, and, finally, to minimize risks which may emerge after the transaction is completed.

It should be noted that this procedure is the part of the prior-to-contract phase, during which lawyers of Profit-Consul as representative of the purchaser try to get as much information as possible to formulate a concrete takeover bid.

In a broad sense, Due diligence embraces:

• corporate information, namely examination of the company's management bodies;
• analysis of any signed agreements and contracts;
• financial statements;
• rights to real estate property;
• construction permits;
• intellectual property rights;
• complying with Labor laws;
• privatization;
• any pending law suits;
• internal company policies and regulations;
• tax issues;
• environmental issues;
• analysis of industry and markets where the company acts and etc.

During Due Diligence lawyers of Profit-Consul check for any antimonopoly issues in connection with the transaction, and if such risks may arise, the approval of the Antimonopoly Committee of Ukraine will be required for the M&A transaction.

Due diligence may be full or focused (limited). The type and scope of Due Diligence review to be performed shall be determined on the basis of the type of transaction planned, taking into consideration the size of the transaction, the legal structure and the type of target company. It should be mentioned that limited-scope legal Due Diligence is often conducted when a purchaser is interested in certain aspects of the target company's business.

Also it still should be noted that to a great extent of the results of Due Diligence depend on the willingness of the owners/managers of the target company to disclose information, because the investigation performed by Law firm Profit-Consul will be based mostly on the documents/information presented by the company and to a lesser extent on the information obtained from the various state registers.

The results of Due Diligence frequently have a decisive effect on M&A transaction itself. Upon the completion of Due Diligence lawyers of Profit-Consul always provide the transferee with information about the risks related to the target company, especially its legal relationships. As for the transferor party, lawyers of Profit-Consul determine and remove potential risks before the transfer procedure's start and in relation with this purpose, prevent the potential claims of the purchaser for risks which might appear after the transfer of the M&A transaction.