Due Diligence in Private M&A in the Netherlands

This blog post is dedicated to the details of due diligence in private M&A deals for Dutch companies.

Company transparency can have a very important impact on its cost. In the Netherlands, business transparency is taken seriously. No one doubts the need for due diligence when acquiring a company.

Scope of DueD

Due diligence service in the Netherlands is in great demand among the participants of the Dutch investment market, as the need for reliable and complete information about the partner increases when concluding a deal. If you are planning a merger in Holland, it is important to keep in mind that Dutch law requires the seller in the context of the transaction to disclose all information about the company that may be considered material to the buyer.

The buyer, in turn, is obliged to conduct a check. It should be noted that not everything is so strict - the participants may well agree on the scope of verification and the degree of information disclosure. It is important that these conditions are reflected in the sales contract.

The scope of due diligence carried out by the buyer in the context of an M&A transaction in the Netherlands can be extended to the whole company, its assets, and liabilities for a comprehensive analysis of the company's activities from the point of view of lawyers, auditors, and financial analysts. The audit process can review and analyze the state of the company's finances, tax issues, reporting, transfer of ownership, safety, and environmental issues.

The due diligence procedure for a Dutch company can take from a few weeks to one year, depending on the size of the business.

In open access

The due diligence of a Dutch company includes searching for data about it in state registers and other authorities.

In particular, the following information about private companies can be found in the register of the Dutch Chamber of Commerce:

1. registration act;
2. company charter;
3. the board and supervisory board members;
4. share capital;
5. annual financial statements, etc.

When acquiring a Dutch company the buyer may be interested in information about real estate belonging to the object of purchase, about mortgages, and other property fees. This information can be easily found in the Land Registry of the Netherlands.

In the Online Dutch Court Register one can find information related to the commercial disputes resolution in the Netherlands.

With the exception of the Dutch Land Register, there is no other public register of liens in the country.

DueD results

The overall goal of due diligence is to reduce existing business risks or completely avoid them, including the risk of acquiring a block of shares at an overvalued value, failure to fulfill obligations, and the risk of losing money or property.

The parties are free to enter into a merger transaction in the Netherlands and agree on the terms of such an agreement. Dutch case law has established that the relationship between the parties in negotiations is governed by the principles of rationality and fairness, which means that the parties are obliged to listen to each other and take into account each other's interests.

As a result of the due diligence procedure, the customer company receives an objective comprehensive analysis of the economic, financial and legal activities of the target business, including human resources and the technological level of production/project. Since specialists from three areas take part in the work, usually three independent reports are prepared, and the most significant information is summarized in a general presentation.

Final word

Even professional investors and banks with their own first-class experts often invite outside valuation and law firms. Comprehensive due diligence services are provided by large international and regional companies as well as small consulting firms.