ABSTRACT
Structuring a due diligence programme is a balancing act between cost and perceived risk. An acquirer cannot discover every possible risk. In civil law jurisdictions, Heads of Agreement can virtually commit the acquirer to doing the deal on the terms specified, unless they are carefully worded. If there are Heads of Agreement, before starting due diligence it is vital for the buyer to make sure that the document is legally non-binding on the buyer and contains 'lock out' or 'standstill' clauses giving the buyer exclusivity. Due diligence relies heavily on information from the seller and on access to the target's management, facilities and advisers. On the subject of confidentiality, it is worth asking the target before due diligence gets underway whether it itself is bound by any confidentiality obligations. One of the great benefits of a properly executed due diligence programme is that it highlights areas of uncertainty which can be ring-fenced by warranties, indemnities or other forms of protection.
