Understanding client legal diligence goals has become
increasingly important in the face of challenging economic
conditions in the energy sector. Buyers are often frustrated by the
high cost of legal diligence and the unwieldy work product created
by external counsel. To maximize efficiency and ensure that clients
are receiving high quality and useful information, we have prepared
the Canadian Oil and Gas M&A Legal Diligence
Rather than offering legal advice, our approach in developing
the Toolkit has been to describe a series of management
practices that we feel can be used to direct the work of any
Canadian legal counsel, external or internal.
The Toolkit outlines three approaches to legal
diligence, offering clients a menu from which they can choose
methods and design an effective diligence process.
1. The Search Review
When the buyer has the expertise and capability to review
material disclosed by the target, external counsel plays a limited
role in the legal diligence process. External counsel reviews key
public registry searches in the jurisdictions in which the target
is active and communicates findings through conversation with the
client, or on request, in writing.
2 .The Limited Review
In addition to completing a Search Review, external counsel aims
to identify material issues that may affect a transaction. External
counsel completes a limited review of the legal documents provided
by the target to identify material approvals and consents required
and to highlight material risks of the transaction. Findings are
reported through conversation with the client and high-level
summary reports. If the target owns interests in land, the buyer is
responsible for title review.
3. The Comprehensive Review
External counsel provides an overview of the target's
material legal affairs and reports on the key legal terms of the
target's material contracts. External counsel reviews land
titles and advises on general employment compliance, litigation,
intellectual property and regulatory issues, as required by the
client. The results of the review are communicated by written
report, the scope and form of which are agreed in advance with the
The Toolkit outlines:
How to implement and manage all three methods
22 best practices for managing diligence and diligence
Sample scoping memorandum for diligence reporting
Sample Comprehensive Review reporting memorandum
A unique, FAQ-based form of contract review reporting
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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