Corporate attorney, what should be prepared before legal due diligence?

Hello. I am a corporate attorney at Daeryun Law Firm (LLC).

In the M&A process, you have asked about the matters to prepare before legal due diligence.

Because M&A is a procedure that most companies are not familiar with, you may experience confusion in preparing for it.

In particular, when legal due diligence (Legal Due Diligence) reveals legal risks, advance preparation is important, because it can affect not only whether the contract is concluded but also the transaction terms, the adjustment of the amount, and even the scope of damages.

One of the first things to check before legal due diligence is precisely an examination of 'contingent liabilities.'

Contingent liabilities refer to uncertain liabilities that have not yet materialized at present but may arise depending on future changes in circumstances or external factors.

Such contingent liabilities are mainly related to the seller's representations and warranties (Representations & Warranties) in the contract.

Therefore, I recommend that you list the items with a possibility of contingent liabilities, focusing on those items, and prepare in advance.

Representative contingent liabilities are related to taxes and litigation, but additional risks may arise depending on the company's industry or internal structure, so please examine these thoroughly.

To prevent such legal risks and contingent liabilities in advance, please establish a systematic strategy with the legal advice of a corporate attorney.