UK: 10 Dos And Don'ts For Legal Due Diligence

Last Updated: 10 January 2018
Article by Andrew Mills, Emmanuel Amos and Ryan Brown


1. Know your destination

Make sure you have a clear idea of your objectives and that you resource your legal due diligence accordingly. Focus in particular on any arrangements or circumstances that appear non-standard, and ensure you have a thorough understanding of all areas that underpin the business' value (e.g. key assets, key trading relationships, business-critical licences). Always cover, in sufficient detail, any areas that an internal or external interested party (e.g. investment committee, or funding bank) may require in order to proceed.

2. Google it*

Publicly available sources can reveal key information about a target. For example, a company's accounts can show material liabilities that would shape the scope of the due diligence review and influence transaction terms, e.g. latent pension scheme liabilities. In the case of UK companies, Companies House records will identify the ultimate beneficial owners and will also reveal any secured creditors.

(* other search providers are available)

3. Scope it right

Agree a clear due diligence scope, including a materiality threshold, with each professional adviser at the outset. Make it detailed. For example, "review of IP for material issues" could prompt a lawyer to review every aspect of a company's intellectual property, prepare a long report and distract attention from the company's true, value-driving assets. Specify the outcome – is it a summary of terms, a list of onerous contracts, a commentary on likely financial exposure? Make sure the scope has been signed off by the right people internally and externally (i.e. those who will rely on it), especially any financing bank. This will help deliver focused, efficient and cost-effective due diligence.

4. Meet the management

Face to face meetings between a buyer's advisers and target's management will always expedite due diligence, and save inboxes. Where permitted by the sellers, arrange for your legal advisers and any other key advisers to meet with the target's management team sooner rather than later to identify and discuss key due diligence issues. Opening communications channels and building trust between your advisers and target management will save time and ensure your advisers have a solid understanding of how the target's business operates.

5. Have a plan

After closing, you should be able to launch straight into implementing your 100 day plan. That is, if you've prepared one (do it). Your plan should pick up on all those niggles and non-show-stopping issues raised during the due diligence process. It should also include an assessment of the target's finances, key trading relationships and any other assets critical to operations and revenue. The plan and a post-acquisition audit should flush out any potential warranty claims and, if you plan to make multiple acquisitions, will be important learning for future transactions. Keep good notes.


1. Don't lose sight of costs

Deal costs should never be a surprise; know who's being paid what, by whom, from the outset. If, as a buyer, there is no scope to agree a seller contribution to your costs up front, could you at least agree to recover some costs if exclusivity is breached? If the buyer is ultimately shouldering costs, is there a clearly itemised budget for due diligence, including contingency for inevitable overrun? Don't forget to agree costs and abort costs with legal and other professional advisers before work starts.

2. Don't scrimp

Where budget or resources are tight, a buyer could be tempted to forgo legal due diligence and instead rely on warranties and indemnities in a sale agreement. Bad idea. Not least, financial recovery may be insufficient to compensate a buyer for a breach of warranty. Bringing a warranty claim can be costly both financially and in terms of any ongoing working relationship with the sellers. Better to discover and price any risks upfront.

3. Don't forget the hot topics

Key contracts – Tick.
Director and employment contracts – Tick.
Litigation – Tick.
Cyber security – ...

Many due diligence processes are stuck in the 90s and purely asset-focussed, but in the 2010s, risk takes virtual form too. It's worth understanding how secure customer data and business-critical software is. Take a look at global hot topics for inspiration, too – business regulation, corruption, fair business practices all loom large in the media and politics, so they might need to feature in your due diligence process too.

4. Don't be short-sighted

A deal is for life, not just for closing. Start planning for the future when the acquisition is first tabled, not in a flurry once closing is secured. Your plans for the target company will impact on due diligence scope (please tell your advisers what those plans are...), valuation and the legal documents. In particular, consider which services, if any, the target will require from the seller or the seller's retained business after closing, for how long, and whether these are currently provided at market cost or below (is the target's cost base artificially low?). This can be a critical workstream if the target is heavily IT dependent.

5. Don't leave your advisers in the dark

Don't take it for granted that your advisers are talking regularly, flagging issues and noting documents of interest to each other. Any truly 'material' due diligence issue will have implications spanning at least two areas of professional expertise – e.g. tax and legal, legal and financial, financial and commercial – and you may run out of time if due diligence is carried out in separate professional silos. You won't be able to fully assess, and react to, critical due diligence issues unless you examine them from all relevant perspectives.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions