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CS Professional · Corporate Restructuring, Valuation and Insolvency · Planning and Strategy

Sundaram Textiles Ltd plans to acquire a controlling stake in Kaveri Dyes Pvt Ltd. Before signing the definitive agreement, its team reviews Kaveri's contracts, litigation, title to assets and statutory filings to find liabilities that could affect the price. Which type of due diligence is this primarily?

This is legal due diligence. Examining contracts, pending litigation, title to assets and statutory filings identifies legal liabilities and defects that may affect price or deal terms, whereas commercial diligence looks at markets and customers and tax diligence only at tax exposures.

  1. ALegal due diligenceCorrect
  2. BCommercial due diligence
  3. CEnvironmental due diligence
  4. DTax-only due diligence

Explanation

Review of contracts, litigation, title to assets and statutory filings is the core of legal due diligence. Commercial due diligence looks at market position, customers and competition, not legal liabilities. Tax-only review would cover just tax exposures.

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