Automating Legal Documents for Due Diligence

A legal due diligence review is more than the legal equivalent to kicking the tires of the back of a car. It is a detailed investigation that uses lawyers and CPAs to confirm documentation and the facts. It requires the analysis of a broad range of subject areas, such as an examination of the legality of contracts as well as litigation liabilities, intellectual property, regulatory compliance, corporate records and financial reviews of financial statements and accounting policies, and tax returns. It also includes an operational review of the company’s management, organizational structure, sales, products, marketing facilities and equipment, supply chain, customer relationships sales and distribution channels, as well as competition.

Legal due diligence can be a lengthy procedure, depending on the level of complexity of the company as well as the magnitude of the transaction. This is especially the case for large companies with virtual piles of documents that lawyers need to sort through. This is why many legal departments have begun to use technology to streamline and speed up the process, such as a document review platform that integrates with AI tools.

Before you begin the legal due diligence process, establish an outline and a goal for the investigation. It is helpful to organize an agenda of areas to cover and have the legal team work out an action plan with the business owners. It is also crucial to determine which areas require special expertise from the firm. A due diligence review of legality on an IP holding company, for instance could include questions from an intellectual property specialist to determine whether the company is the owner of any important patents or other intellectual-property rights, and whether there are any infringement cases currently being considered or expected to be filed.

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