Often carried out before signing M&A deals, due diligence is a procedure that is meant to verify the object of the agreement. Concluding an M&A deal in the US requires taking a responsible approach to DD of an American company; therefore, knowing how the general provisions on due diligence & liability for statements apply to M&A agreements is absolutely vital.
Liability for Statements
Prior to signing an M&A deal in the US, sellers rarely provide DD reports to potential buyers. At the same time, they may be held responsible for distorting information, if this is provided for by the terms of the contract.
However, purchase agreements generally limit the seller's liability for breaches of express statements or warranties & exclude liability for pre-contractual & misleading statements (except in cases of fraud).
Those considering conducting DD of an M&A deal in America should keep in mind that publicly available information about private companies & their assets is very limited. Under the current legislation, companies aren’t required to submit financial statements, information about the BoD, persons with significant control over the company or changes in the statutory capital.
Normally, potential purchasers search for information in the register maintained & kept up-to-date by the office of the Secretary of State. Usually, they’re interested in:
- confirmation that no application for liquidation or dissolution of the company has been submitted;
- lien & registered IP;
- court protocols in countries where a US company was registered (or mainly conducted its activities).
However, it’s important to understand that such a search may not be exhaustive.
Ordering legal advice on conducting M&A deals in America is the necessary prerequisite for successfully completing an M&A transaction in the US. IQ Decision UK experts can help you with verifying the conditions & implementation of such agreements. They can also lend you a hand with registering a company in the US.