Modus Operandi: 10 Things About Due Diligences Every Corporate Lawyer Should Know

There are two words that can make any corporate lawyer quiver in fear – “Due Diligence”. The waves of nausea an associate feels as their boss bounces in, announcing a new transaction with a massive diligence exercise, is one of the few things that remains constant across firms, cities and continents. Even Harvey Specter, with his impossibly slim-cut suits, would fail to make the term sound glamorous..And echoing the words of every Partner in the history of law firms, “What can we do? The client wants it.” Much like women and their eternal battle with hair removal, diligences in a corporate firm don’t change, don’t stop and don’t become less painful no matter how much you pray or rage. I suppose there’s some small value in knowing your enemy though. Here are 10 things I’ve seen, learnt or experienced in my 4 years of ardent “diligencing”. But all I’m really saying in this piece is “stay calm.”.10. The Technology Break Down.Increasingly, target companies demonstrate the courtesy to upload their mish mash of documentation on to a virtual data room allowing us to conduct our review from the comfort of our grey cubicles. Even if you’re in a physical data room though, there’s nothing like typing the words “Due Diligence Report for [___]” on to a word document to awaken every virus, malware and defect on your system. The data room won’t load, the documents won’t open, the bankers will forget to allow half the team access and at least one team member’s laptop will martyr itself. Usually about two hours before your deadline. Stay calm..9. Everyone will change their mind.There’s no feeling quite like the one you experience after reviewing fifty four random agreements relating to a service you didn’t know anyone provided and governed by obscure laws you didn’t know existed to find out that they are now out of the scope of the diligence. I’m now convinced that nobody ever really knows the scope of a diligence and we’re all just guessing and hoping for the best. Alternatively the sweet company secretary you’ve been interacting with will decide he doesn’t trust you with his company’s documents. Or (my favourite of the lot) once you slap together a 300 page behemoth report, cross reference it twice and almost get into a brawl with your cubicle mate, the client will decide they’re not really interested in the investment and the deal is in the toilet. Stay calm..8. Everything was due 5 minutes ago.No matter how much time you have to start with, every diligence report ends in a scramble of all nighters, last minute revisions and palpitations. This is largely because the law you will deal with the most during a diligence will be Murphy’s. Stay calm..7. The Missing Link.Inevitably, at least one member of a diligence team will be struck by illness, personal tragedy or wanderlust and vanish, usually with a pile of documents you desperately need. Alternatively they will be physically present but only to inform you at the last minute that they’ve only completed a third of what they were supposed to. Stay calm..6. The Uncooperative Counterparty.When done right and practiced with perspective and grace, corporate law can be a dignified, civilized thing. Unfortunately a lot of people get caught trying to be cowboys so we spend our days caught in needless conflict, making foolish arguments, and straining ourselves to run in the same old circles. Maybe the only way to go on is to keep dancing this tired dance. Stay calm..5. The Fiction of Compliance.With any diligence no matter how dreary things get you have to keep your eyes very, very wide open because, sometimes with intent and sometimes without, companies can make egregious mistakes. Make notes on everything, double, triple check them and try to remember when your patience is running out that eventually, quality will be worth more than speed. Stay calm..4. The Wake Up Call.There’s nothing like jumping into a full-fledged diligence to reinvigorate other aspects of your life. Your other clients, family, significant other and pets will all want to make plans with you, spend more time together or undertake a new project. The dates of the online course will come up, meetings will be pre-poned, old friends will crawl out of their cocoons and want to talk about life and its complexities..I’d like to say that there’s a way to balance all these demands on your time but I haven’t come across any solution apart from caffeine. I can tell you it helps to be organized and try to keep distractions to a minimum but nobody needs that kind of bumper sticker advice. Stay calm..3. The Inevitable Slip Up.No matter how careful you are or how much time you take, you are going to make a mistake. The truth is that looking so carefully at so many moving parts is bound to make anyone cock eyed. Take extensive notes and file away every scrap paper you have on hand to keep from being tangled in all the loose ends. Also make sure you are communicating with your team members, a non issue in the real estate section may have far reaching consequences for the corporate chapter – reading all the emails floating around and staying on the same page will keep you from duplicating work. Stay calm..2. The Value of Precedent.Quickly running through the format of a DD report will help you focus on the points to note and capture as well as acquaint you with the style of drafting expected from you. Similarly if you’ve never diligenced before ask your senior to run through the process with you – the 10 minutes you’ll spend figuring out how to do it may potentially save you a whole night of rewriting later. Stay calm..1. More Issues than a Magazine Stand.Or not. It’s rare but occasionally you may come across a target that doesn’t really have any infarctions or has only minor secretarial non-compliances but otherwise is doing perfectly well. When you spend so much time sifting through a company’s paperwork you may wish you had something more to show for it. Avoid the temptation to make a mountain of a molehill – sometimes everything really is okay. Like you will be, when you finish your diligence..And remember, stay calm..Yashasvini Kumar graduated from NALSAR University of Law, Hyderabad and is currently working at a law firm in Delhi. In her spare time she is often cooking or writing about food at “For the Reluctant Chef“. You can read her previous column here..Lead image provided by the author