A local business was interested in partnering with a seemingly successful attorney but decided to conduct a due diligence investigation first. The investigation uncovered that the attorney had been charged with 18 counts of fraud, including money laundering and making false statements, resulting in criminal convictions and jail time. As a result, the local business declined to pursue the partnership to avoid reputational damage. Due diligence investigations are an important part of mergers and acquisitions to uncover potential risks, as even small issues found can end deals or cause large financial losses later on. While they add cost upfront, they are minor compared to issues that may be discovered after a deal is completed.
Exponential expansion in the use of Requests for Proposals (RFPs) has placed a powerful tool in the hands of general counsel — one that they use with uneven skill. Here are the pitfalls to avoid and the keys to making RFPs clear, fair and effective.
Increasingly, law firms have used the device of merger as a road to quick growth. Without comprehensive planning the merger route is a hazardous undertaking.
Business Entities: classify, understand, choose, and manage.Berkman Solutions
Business entities are essential for starting, managing, and growing your business. This guides to business entities covers every major type, core concepts, criteria for choosing an entity, and legal entity management.
“Business entity” is a generic term with no legal significance per se. A business entity simply refers to the form of incorporation for a business. When a business incorporates, the law recognizes the business as a distinct entity which can enter contracts and acquire property among other rights and privileges.
There are, of course, some exceptions like sole proprietorships and general partnerships, which do not require incorporation. They also do not have the same right and privileges as incorporated legal entities.
There are four broad groups of business entities: limited liability companies, corporations, partnerships, and sole proprietorships. There are important flavors of each class of business entity.
Learn the best way to start managing commercial contracts. Go from contract files and spreadsheets to an effective, efficient, and profitable contract management system.
Topics covered include:
- What is a contract?
- Why contract management matters
- Turn text to data
- Deal with documents
- Contract portfolio management
- Contract management systems
Clear, practical recommendations to get you started.
Exponential expansion in the use of Requests for Proposals (RFPs) has placed a powerful tool in the hands of general counsel — one that they use with uneven skill. Here are the pitfalls to avoid and the keys to making RFPs clear, fair and effective.
Increasingly, law firms have used the device of merger as a road to quick growth. Without comprehensive planning the merger route is a hazardous undertaking.
Business Entities: classify, understand, choose, and manage.Berkman Solutions
Business entities are essential for starting, managing, and growing your business. This guides to business entities covers every major type, core concepts, criteria for choosing an entity, and legal entity management.
“Business entity” is a generic term with no legal significance per se. A business entity simply refers to the form of incorporation for a business. When a business incorporates, the law recognizes the business as a distinct entity which can enter contracts and acquire property among other rights and privileges.
There are, of course, some exceptions like sole proprietorships and general partnerships, which do not require incorporation. They also do not have the same right and privileges as incorporated legal entities.
There are four broad groups of business entities: limited liability companies, corporations, partnerships, and sole proprietorships. There are important flavors of each class of business entity.
Learn the best way to start managing commercial contracts. Go from contract files and spreadsheets to an effective, efficient, and profitable contract management system.
Topics covered include:
- What is a contract?
- Why contract management matters
- Turn text to data
- Deal with documents
- Contract portfolio management
- Contract management systems
Clear, practical recommendations to get you started.
Business Breakups (Series: Common Commercial Conflicts)Financial Poise
As any entrepreneur will attest, starting and operating a business comes with unique challenges. These challenges are a key reason that, by some estimates, half of the companies that are founded today will not exist four years from now. It can be argued that the effort and attention needed to find success precludes business owners from planning for failure. This webinar focuses on the realities of a failing business from the owners’ perspective. Join our panel of experts as they discuss the various considerations that should be given at the outset of start-up negotiations and through business breakup, including dispute negotiation and litigation.
To view the accompanying webinar, go to: https://www.financialpoise.com/financial-poise-webinars/business-breakups-2019/
Tyler Tysdal investors who are concerned they may have suffered losses by investing in Tysdal Funds are encouraged to reach out to investor lawyers at Goldman Scarlato & Penny. Their investigation is focused on third parties that may be liable for some of investor losses.
Visit https://investorlawyers.org/tysdal-investor-center/ for more information.
Government Investigations and Enforcement ActionsPolsinelli PC
The fifth webinar presentation in the M&A Litigation Series examines compliance pitfalls associated with M&A transactions. We will discuss how to evaluate antitrust risks of a transaction. We also will address compliance concerns – such as antitrust, the Foreign Corrupt Practices Act, the False Claims Act, and export control issues – that could significantly impact the scope, duration, and magnitude of necessary due diligence. Finally, we will address post-merger considerations that could decrease the severity of a compliance concern if one were to arise after a merger or acquisition has been completed.
On our agenda:
-Pre-transaction – evaluating the transaction itself from an antitrust perspective
-Pre-closing – managing client conduct and the risk of “gun jumping”
-Due Diligence – what to look for
-Post-merger considerations for fostering and perpetuating a “Culture of Compliance”
-Managing compliance concerns that are discovered post-closing
Gone are the days of corporate secretary duties performed in isolation. General counsel are under increasing pressure to deliver and demonstrate value to the organization. [Legal entities proliferate]. [New tax laws] and [privacy regulations like the GDPR] force a reassessment of legal structures.
Managing legal entities efficiently is critical for general counsel balancing legal, risk management, and leadership responsibilities. This presentation provides a comprehensive review of [entity management as a legal practice] and [entity management software ]as a tool from the perspective of the general counsel and in house legal team.
Mercer Capital's Tennessee Family Law | Volume 2, No. 3, 2019 | Valuation & F...Mercer Capital
Mercer Capital is the largest valuation and financial advisory firm in Tennessee with offices in Nashville and Memphis. Complex financial issues are a critical part of many of your client engagements. The focus of this newsletter is to provide useful content about these financial issues from the perspective of financial experts. We seek to help you assist your clients in financial and accounting matters.
What Law Firms Need to Do To Profit and SucceedJohn Bowie
LawFuel spoke with law marketing and branding expert Eric Fletcher on what law firms need to do to achieve profits and success in the years ahead. One thing is clear, he says, and that is the need for a clear focus on the clients.
The rise in social media, rapid changes in technology, increased competition, changing fee structures - there are a whole lot of reasons why law firms need to be aware of how they can best make themselves successful in a challenging and competitive marketplace.
Strategies for Proposing Law Frm Rate Increases Richard Brzakala
This article examines various strategies that a law firm can utilize when approaching corporate clients for rate increases, including how to manage client rate freezes and refusals for rate increases.
Antitrust seminar at 2014 CreditScape, Western Region Credit Conference Seminar Slide Deck, sponsored by Credit Management Association. More information: www.creditmanagementassociation.org
Due Diligence for Crowdfunding: How Do You Vet a Crowdfunding Portal?Rachel Speal
How does due diligence work with crowdfunding? How do you determine whether or not the portal is really a Ponzi scheme, willing to take your money and run?
And how do you check out the investments themselves, without using up all the profit on expensive appraisals?
Learn how to vet crowdfunding portals and the investments they list with this informative yet brief presentation.
Business Breakups (Series: Common Commercial Conflicts)Financial Poise
As any entrepreneur will attest, starting and operating a business comes with unique challenges. These challenges are a key reason that, by some estimates, half of the companies that are founded today will not exist four years from now. It can be argued that the effort and attention needed to find success precludes business owners from planning for failure. This webinar focuses on the realities of a failing business from the owners’ perspective. Join our panel of experts as they discuss the various considerations that should be given at the outset of start-up negotiations and through business breakup, including dispute negotiation and litigation.
To view the accompanying webinar, go to: https://www.financialpoise.com/financial-poise-webinars/business-breakups-2019/
Tyler Tysdal investors who are concerned they may have suffered losses by investing in Tysdal Funds are encouraged to reach out to investor lawyers at Goldman Scarlato & Penny. Their investigation is focused on third parties that may be liable for some of investor losses.
Visit https://investorlawyers.org/tysdal-investor-center/ for more information.
Government Investigations and Enforcement ActionsPolsinelli PC
The fifth webinar presentation in the M&A Litigation Series examines compliance pitfalls associated with M&A transactions. We will discuss how to evaluate antitrust risks of a transaction. We also will address compliance concerns – such as antitrust, the Foreign Corrupt Practices Act, the False Claims Act, and export control issues – that could significantly impact the scope, duration, and magnitude of necessary due diligence. Finally, we will address post-merger considerations that could decrease the severity of a compliance concern if one were to arise after a merger or acquisition has been completed.
On our agenda:
-Pre-transaction – evaluating the transaction itself from an antitrust perspective
-Pre-closing – managing client conduct and the risk of “gun jumping”
-Due Diligence – what to look for
-Post-merger considerations for fostering and perpetuating a “Culture of Compliance”
-Managing compliance concerns that are discovered post-closing
Gone are the days of corporate secretary duties performed in isolation. General counsel are under increasing pressure to deliver and demonstrate value to the organization. [Legal entities proliferate]. [New tax laws] and [privacy regulations like the GDPR] force a reassessment of legal structures.
Managing legal entities efficiently is critical for general counsel balancing legal, risk management, and leadership responsibilities. This presentation provides a comprehensive review of [entity management as a legal practice] and [entity management software ]as a tool from the perspective of the general counsel and in house legal team.
Mercer Capital's Tennessee Family Law | Volume 2, No. 3, 2019 | Valuation & F...Mercer Capital
Mercer Capital is the largest valuation and financial advisory firm in Tennessee with offices in Nashville and Memphis. Complex financial issues are a critical part of many of your client engagements. The focus of this newsletter is to provide useful content about these financial issues from the perspective of financial experts. We seek to help you assist your clients in financial and accounting matters.
What Law Firms Need to Do To Profit and SucceedJohn Bowie
LawFuel spoke with law marketing and branding expert Eric Fletcher on what law firms need to do to achieve profits and success in the years ahead. One thing is clear, he says, and that is the need for a clear focus on the clients.
The rise in social media, rapid changes in technology, increased competition, changing fee structures - there are a whole lot of reasons why law firms need to be aware of how they can best make themselves successful in a challenging and competitive marketplace.
Strategies for Proposing Law Frm Rate Increases Richard Brzakala
This article examines various strategies that a law firm can utilize when approaching corporate clients for rate increases, including how to manage client rate freezes and refusals for rate increases.
Antitrust seminar at 2014 CreditScape, Western Region Credit Conference Seminar Slide Deck, sponsored by Credit Management Association. More information: www.creditmanagementassociation.org
Due Diligence for Crowdfunding: How Do You Vet a Crowdfunding Portal?Rachel Speal
How does due diligence work with crowdfunding? How do you determine whether or not the portal is really a Ponzi scheme, willing to take your money and run?
And how do you check out the investments themselves, without using up all the profit on expensive appraisals?
Learn how to vet crowdfunding portals and the investments they list with this informative yet brief presentation.
Welcome to my series of articles on Unified Modeling Language. This is "Session 1 – Introduction to UML" of the series. Please view my other documents where I have covered each UML diagram with examples
Companies would be wise to enhance their due diligencepractices before engaging in a foreignmerger or other business transaction in light ofthe Securities and Exchange Commission and Departmentof Justice’s increased scrutiny over Foreign CorruptPractices Act compliance, an FCPA and internationalpractice attorney and a specialist in foreign overseaspractices told BNA in recent interviews.
The three-steps guide for successful litigation procedures. Information about third-party litigation funding included. Worthwhile literature provided by Redress Solutions, London, UK.
Legal due diligence is the process of collecting, understanding and assessing all the legal risks associated during Financing/M&A process. During due diligence, the acquirer reviews all the documents pertaining to a target company and interviews people associated with it.
BUSINESS LAW REVIEW- 2022: Defending White Collar Crime-101Financial Poise
While white collar crimes don’t usually carry the same stigma or penalties as violent crime, the consequences of a conviction, or even an allegation can be devastating. Leaving prison time aside, the business may also face investigation, prosecution and possibly, the risk of reputational damage, financial loss and unwanted exposure.
As governmental enforcement of laws against those accused of white collar crime increases, companies need to understand how to avoid unknowingly acting in ways that may be unlawful, how to prevent and detect potential employee misconduct, and how to react if misconduct does occur.
Part of the webinar series: Business Law Review 2022
See more at https://www.financialpoise.com/webinars/
Compliance issues are at the front of every manager's and fiduciary’s mind these days. It used to be that all the worry came from a creative plaintiffs’ bar calling a business's conduct into question, but those days are long gone. Public and private companies are investigated by not only the United States federal government, but also local, state, and foreign governments. Self-regulating entities also add a layer of scrutiny. Under the insulation of the attorney-client privilege, an effective internal investigation can help marshal the facts to inform corporate decisions about past or existing violations and prevent potential future violations. An internal investigation can protect management from the violation and records the company's response to an incident or violation. However, most importantly, it serves to send a clear message that the company is serious about compliance and that it sets transparency as a priority. This webinar surveys recent compliance trends and discusses best practices regarding the attorney-client privilege, joint defense agreements, the use of experts, witness interviews, the consequences of self-disclosure and how to control the impact on the company.
To view the accompanying webinar, go to: https://www.financialpoise.com/financial-poise-webinars/internal-investigations-101-2021/
Buy-Sell Agreements for Investment Management Firms: An Ounce of Prevention i...Mercer Capital
If you are an owner of an investment management firm and have not reviewed your buy-sell agreement recently, you’re not alone. Buy-sell agreements are frequently the most forgotten corporate document in the file. No one thinks about buy-sell agreements until a triggering event, and then it becomes the only thing they think about. Partners are often surprised by the language in the contract they signed many years before, and too often a serious dispute breaks out between partners over what the words in the agreement mean, or were intended to mean. The purpose of this whitepaper is to equip ownership to understand the consequences of their buy-sell agreements before a controversy arises, and to make informed decisions about the drafting or re-drafting of the agreement that promote the financial health and sustainability of their firm.
Valuing Real Estate Assets (Series: Fairness Issues in Real Estate-Based Bank...Financial Poise
As the expression goes, the value of real estate is in the eye of the beholder. Ultimately, the value is whatever the market is willing to pay. While income producing properties, particularly with creditworthy tenants, may be fairly routine to value based on the current rate of return demands in the market, non-income producing properties may be more speculative.
For example, even the most seasoned appraiser may struggle with finding comparative sales for a property. A landowner might see their property value go up exponentially “if only” the city council will allow for a zoning variance. Many an owner believes that their property is in the “path of progress,” but when? Is it reasonable to value a property “as stabilized” if it is only forty percent leased? These are the types of questions we will consider.
To view the accompanying webinar, go to: financialpoise.com/financial-poise-webinars/valuing-real-estate-assets-2021/
1. just don’t work out. However, a subsequent search of local newspapers revealed
allegations of conspiracy and political campaign fraud. Further research revealed
that the seemingly innocuous, successful attorney had been charged with 18
counts of fraud, among them allegations of money laundering and making false
statements to federal investigators. Ultimately, these charges had resulted in
several criminal convictions and a jail sentence.
After additional investigation turned up more negative information, the local
business declined to pursue a corporate relationship. Their small investment in
due diligence services saved them a large amount of damage to their reputation.
Buy and Sell with Confidence
Even though corporate mergers are common, it’s surprising how frequently one or
both merging parties don’t share all the facts. This all-too-real risk is why due
diligence investigations are so important to merger and acquisition efforts.
“I cannot imagine a serious merger negotiation without due diligence,” says
Edward Dupke, principal and practice director for business valuation, litigation
support and merger and acquisition services for The Rehmann Group. “It is just
an integral part of the whole concept. Someone once said, ‘Trust everybody, but
cut the cards.’ Due diligence is the work you do in cutting the cards to make sure
your side is getting a fair shake.”
There are two sides to a due diligence investigation on any potential merging
partner. The financial side looks at the numbers as presented, the processes that
create those numbers (internal controls) and any unrecorded liabilities. The non-
financial side focuses on background information on both the principals of the
company and the company itself. Specific examples include investigations of any
criminal, civil or federal charges the principals might have, bankruptcy records of
the principals and the firm, property and tax holdings of the firm, other business
connections the principals might have and searches of local newspapers to
determine the firm’s and the principals’ standing within their local community.
Due diligence is not just for buyers. Sellers need to ensure that potential
purchasers have the financial resources to make the agreed-upon payments. Due
16 THE REHMANN GROUP
C A S E S T U D Y
Why Due Diligence
Investigations Are Crucial
to Mergers and Acquisitions
The Unethical Attorney
A local business became interested in establishing
corporate relations with a successful attorney
who managed a healthcare system and several
companies in addition to his practicing law.
Although managers at the business had no
reason to suspect the attorney of any crimes,
they believed an investigation of the attorney’s
background would be a wise final step before
committing themselves to a business relationship.
They contacted Kerby, Bailey and Associates,
a subsidiary of The Rehmann Group, to conduct
a due diligence investigation on the attorney’s
business history.
Background investigators discovered that
the attorney had several canceled and revoked
business licenses. Not an ideal past, but not
unusual either — sometimes start-up businesses
By Ryan Richards
2. diligence services can also help sellers get the most money for their
businesses. “A buyer might look to pay a certain price based on the
documented history of the business,” Dupke says. “The seller has
often gone through blood, sweat and tears to improve the business
over and above what the history indicates, so we do calculations to
show [a more accurate] value.”
Due diligence investigations on merging companies happen
between the time a non-binding letter of intent is signed and the time
both parties formalize the merger with a binding purchase agreement,
usually about six months. The investigation often proceeds while both
sides are working on the purchase agreement.
In general, due diligence is covered by one or more paragraphs in
the letter of intent, and its specific provisions are usually explained in
the purchase agreement. In these cases, companies have to consent to
the due diligence process and agree to provide access. “Sometimes a
[merging] firm has reasons for keeping the due diligence process
hidden from the other firm, but usually it’s a formal process and both
parties are aware it’s going on,” says Thomas Murphy, manager of
background investigations for Kerby, Bailey and Associates.
There are good reasons to keep everyone aware of the due diligence
process, explains Heidi Bolger, managing principal at the Saginaw
office of The Rehmann Group. “In some cases you will need the
seller’s assistance and/or authorization to adequately complete the
process,” she says. “For example, executives need to provide a written
authorization for background checks.” Being “up front” about the
process, however, does not necessarily mean detailing all the steps
involved, since that could prove counterproductive.
The Risks are Real
The due diligence process is not designed to be threatening for either
party. Negative information found during an investigation is very
often shared with the firm in question to give them an opportunity to
explain what happened. “They may have been sued by another firm,
for example,” Murphy says, “but maybe the other firm was just overly
litigious. This gives them a chance to say, ‘No, there was no basis to
that.’” A bad finding in a due diligence investigation, he says, doesn’t
necessarily mean the merger won’t take place.
On the other hand, sometimes due diligence results can change the
entire outcome of a merger. Dupke recalled a merger effort where he
was asked to do a due diligence investigation on a potential acquisi-
tion. His investigations revealed that the customer was in financial
trouble and in serious risk of going bankrupt. “As a result of our due
diligence work, management not only did not buy the customer, they
put them on COD.” The company collected half a million dollars
more than they would have before the customer ultimately filed for
bankruptcy.
In light of such risks, the value of due diligence services cannot
be overstated. “The cost of a due diligence investigation varies, but
generally it’s about $1,000 per subject,” Murphy says. “That’s pennies
on the dollar compared to the risks you run without it.”
Bolger sees due diligence as an essential part of every merger.
“It’s a very unhappy event to be surprised after the fact and very
expensive to undo a deal,” she says. “Although due diligence can
seem expensive on the front end, it can really impact the negotiation
process and price paid. It’s just good business and well worth the
investment to use professionals who know what to look for and get
the right answers.”
BW D Fall/Winter 2004 17
The due diligence process
is not designed to be
threatening for either party.
Negative information
found during an investigation
is very often shared with
the firm in question to give
them an opportunity to
explain what happened.
For more information about involving due diligence services in the sale
or purchase of a business, contact Thomas Murphy at 989.790.0450 or
Edward Dupke at 616.975.4100. Or, visit our website at www.rehmann.com.