How to carry out a due diligence exercise

Author: John McMullen

Summary

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• Be aware that the acquisition of a business will involve the acquisition of responsibility for the employment contracts of those employed in the transferring business.
• Be aware of the importance of the interlinked exercises of due diligence, the transferor's warranty and the underpinning indemnity.
• In a second-generation outsourcing situation appreciate that the outgoing contractor may have little incentive to supply information in response to a due diligence request.
• Take into account that the transferor must provide certain employee liability information. However, be aware of the limitations of the relevant TUPE provisions.
• In a TUPE transfer situation be aware of all the liabilities that will pass to you as the new employer.
• Be aware of the minimum information that should be requested in a due diligence exercise, but remember to take into account any more unusual circumstances in your queries.
• Observe the data protection requirements with regard to the information that the transferor provides.
• Note that if the deal does not go ahead the arrangements agreed with the potential transferor may require that you return or destroy the information.