Skip to content

CS Professional · Corporate Restructuring, Valuation and Insolvency · Process of M&A Transactions

Veda Textiles Ltd is negotiating to acquire 100% of Kaveri Dyes Pvt Ltd. Before signing the share purchase agreement, Veda's team reviews Kaveri's statutory registers, title deeds, pending litigation and tax assessments. What is the primary purpose of this exercise in the M&A process?

Due diligence is carried out to verify facts about the target and uncover risks and liabilities, so the acquirer can price the deal and negotiate terms on an informed basis. It does not replace Tribunal approval or contractual warranties and indemnities.

  1. ATo verify facts and identify risks and liabilities of the target so that price and terms can be decided on an informed basisCorrect
  2. BTo obtain the Tribunal's sanction for the acquisition
  3. CTo fix the swap ratio using only the face value of shares
  4. DTo replace the need for any representations and warranties in the agreement

Explanation

Due diligence is an investigation of the target's legal, financial, tax and operational position before the deal is concluded. It helps the buyer price the deal, negotiate protections and decide whether to proceed. It does not give any Tribunal sanction, and it does not remove the need for warranties, which still allocate residual risk.

Did you get it right without looking?

One question tells you little. A timed set on Process of M&A Transactions shows your real accuracy, how long you take and where you lose marks.

Practise Process of M&A TransactionsFree diagnostic mock

More Process of M&A Transactions questions