Automating Legal Documents for Due Diligence

A legal due diligence is more than just running the tires of an automobile. It is a thorough investigation that uses lawyers and CPAs to verify documents and data. It entails a review of many areas including a legal review which includes contracts, litigation liabilities and intellectual property and corporate records and compliance with regulatory requirements, an audit of financials which includes accounting policies, financial statements and tax returns. It also involves an operational review of the business’s management structures, organizational structure, products, services, sales, marketing, facilities and equipment, supply chain, customer relations as well as distribution and sales channels, as well as competition.

Based on the amount of the deal and complexity of the company depending on the size of the deal and complexity of the company, the due diligence process can be very demanding, particularly for large public companies with massive piles of documents that lawyers have to sort through. As a result, many legal departments are starting to use technology to streamline and expedite the process, for instance a document review platform which integrates with AI tools.

Establish a framework for the investigation and establish a target before you begin your legal due diligence. It is beneficial to create an outline of the areas to cover and to have the legal team come up with the strategy of attack with the business owners. It is also important to prioritize which areas require special expertise from the firm. A legal due diligence check on an IP holding company, for example could include questions from an expert in intellectual property to determine if the firm is the owner of any important patents or other intellectual-property rights and if there are any infringement cases currently or in the pipeline.

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