Expertise/Mergers and Acquisitions

Service

Legal Due Diligence

Before a transaction, or outside one, documents and public sources are used to establish the rights, obligations and material legal risks of a company or its assets.

We are most often instructed by:

  • Business buyers and investors
  • Sellers preparing a company for sale
  • Owners and executives of an operating company

The information on this website is provided for information purposes only and does not constitute a public offer.

What the Service Includes

Timing and Fees
from 10business days
from ₽fee on request

Timing and fees are indicative and are confirmed when the engagement is agreed.

01 / Overview
When legal due diligence is carried out
  • Before acquiring a business or investingDue diligence makes it possible to assess the legal condition of the business or asset being acquired before a final decision is taken and to identify issues relevant to the structure, price and terms of the transaction.
  • When preparing a business for saleDue diligence on the owner's side identifies material issues before information is passed to a buyer or investor and shows which risks should be remedied, disclosed or taken into account in preparing the transaction.
  • To assess the risks of one's own businessLegal due diligence is also carried out outside a transaction: the aim is to obtain a systematic picture of the company's legal risks and to determine where documents, structure or business processes should be changed.
  • Before material changes in the businessDue diligence may be needed before raising financing, changing the ownership structure, admitting a new partner, reorganizing, scaling up or launching a new line of business. The scope of the analysis is determined by the issues that matter for the planned changes.
02 / Stages
Stages of the due diligence
  1. Purpose and scopeThe purpose of the due diligence, the areas to be covered and the depth of analysis are determined.
  2. Public informationRegisters, court cases and other public sources are analysed.
  3. Document requestA list of documents is drawn up and access to them is arranged.
  4. AnalysisDocuments in the selected areas are reviewed and questions to the company are clarified.
  5. ReportA report is prepared setting out the risks, their level and recommendations.
  6. Use of findingsThe findings are reflected in the terms of the transaction or in a risk mitigation plan.
03 / Outcome
Service Outcome
  • Due diligence reportA description of the circumstances identified, the legal risks and their possible effect on the transaction, the company or the asset.
  • Risk prioritiesA distinction between material issues and technical comments, with an assessment of the consequences and of whether the issues can be remedied.
  • Recommendations for the transactionIssues to be addressed in agreeing the structure, price, payments, liability of the parties and closing conditions, where the due diligence is carried out before a transaction.
  • Risk mitigation planRecommendations on changes to documents, structure and processes, with the sequence of steps required.

The outcome of the service is the work performed within the scope agreed with the client.

04 / Projects
Selected Projects
01 / 06

Acting for the buyer

Acquisition of a group of companies in industrial equipment and digital solutions

Challenge

Advising the buyer on the acquisition of shares in a foreign company that owns a Russian manufacturer of industrial equipment and digital solutions for equipment management and monitoring, as well as shares in a Russian legal entity. The acquisition of the foreign company was governed by English law.

What was done

Comprehensive legal due diligence of the Russian business was carried out, covering its corporate history, contractual relationships and intellectual property rights. The foreign ownership structure, title to the shares being acquired and the legal aspects of the buyer's entry into the existing corporate structure were analysed separately. The structure and documents of the transaction were agreed, and the findings on the Russian and foreign parts were reflected in the terms of the transaction and the arrangements for its closing.

Acting for the sellers

Sale of four production assets in a single transaction

Challenge

Advising three sellers on the sale of four production assets of a building materials manufacturer to a single buyer. The assets were held in different ways – through interests in companies, as a property complex and through a mixed structure – and closing for all four assets had to take place simultaneously.

What was done

A single transaction structure was developed: some assets were transferred through the sale of participatory interests and others through transactions with the property complex. The parties and the contractual documentation were coordinated to take account of the different legal regimes for transferring the assets.

Option programme

Option programme for an investment fund linked to asset returns

Challenge

Advising on the design of an incentive programme for the managers of an investment fund and the executives of its portfolio companies (11 companies in the portfolio). The size of the economic participation had to be linked to the actual return on the assets, while retaining control over the terms on which key partners participate.

What was done

A multi-level model was developed: phantom participation in the value of the fund, with the possibility of moving to an equity interest in individual portfolio companies once set targets are met. The terms varied according to each participant's role and level of responsibility, and economic rights were tied to confirmed results.

Partnership arrangements

Structuring a partnership of three owners

Challenge

Advising on documenting the relationship between three partners with different stakes, ownership horizons and expectations regarding the management of the business. A model for decision-making and for changes in ownership was needed under which a significant divergence of interests would not lead to a corporate deadlock.

What was done

A multi-level system of mutual option mechanisms was developed, triggered by predefined circumstances, including changes in financial performance or in the ownership structure and the occurrence of a deadlock. A separate course of action for the partners was set out for each scenario.

Acting for the seller

Sale of an interest in a packaging manufacturer

Challenge

Advising the seller on the sale of an interest in a packaging manufacturer with net assets exceeding RUB 500 million. The seller was also the company's director, so the risk of claims relating to the management of the company being brought against the seller after the exit was taken into account.

What was done

The transaction was structured with possible claims after the transfer of the interest to the new owner in mind. Mechanisms were put in place to limit these risks and protect the seller's interests after closing.

Raising investment

Investment in a developer of treatment systems with a buy-back right

Challenge

Advising on raising investment for a growing company that develops treatment systems. The financing was provided directly to the company, with the investor acquiring an equity stake.

What was done

The transaction was structured with a right to buy back the investor's stake upon the occurrence of agreed conditions. This mechanism combined raising capital to develop the business with a predetermined scenario for changes in ownership.

05 / Questions
Frequently Asked Questions

Legal due diligence is an analysis of the legal condition of a company, a business or individual assets. It makes it possible to identify legal risks, assess their possible consequences and determine further action in the light of the purpose of the due diligence.

The scope depends on the business and the purpose of the due diligence. The analysis may cover the ownership structure, business operations, contracts, assets and real estate, intellectual property and IT, financing, proceedings, employment relations, data handling and other material areas.

Not every project requires all areas to be reviewed in equal depth.

A risk is material if it may appreciably affect the operations or value of the business, rights to key assets, the ability to complete the transaction or the implementation of the owners' plans.

The materiality of a risk is determined not only by the potential size of losses. Whether the risk can be remedied, its effect on key processes and the dependence of the outcome on the actions of third parties are also relevant.

Legal due diligence assesses the rights, obligations and legal risks of a business; financial due diligence analyses its financial position and the quality of its figures.

The two complement each other, and work with financial advisers is coordinated.

A counterparty check is usually aimed at assessing a specific person before a contractual relationship is entered into or continued.

Legal due diligence involves a more in-depth analysis of the legal condition of a business, its assets, obligations and internal relationships. Its scope is determined by the specific management or transactional objective.

The list is determined once the scope of work has been agreed. Legal due diligence usually requires access to constituent documents, contracts, property, HR and other documents in the selected areas.

If some information is missing or is not provided, the significance of the gap is assessed and, where possible, information from independent sources is used.

The timing depends on the scope of work, the number of companies, the structure of the business, the quality of the materials provided and the depth of analysis.

A public records analysis can be carried out within three business days. The timing of legal due diligence is determined once its scope has been agreed and initial information about the company has been received.

An hourly rate, a fixed fee or a combined model is used; in some cases part of the fee depends on the outcome achieved. The fee is determined by the time actually spent, the complexity of the matter and the overall timeframe of the project, and is agreed before work begins.

Key Contacts
Deni Murdalov Deni Murdalov Partner, PhD (Law), LL.M.

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Other Services in This Practice
Buying and Selling a Business Joint Ventures (Partnerships) Deal Structuring Cross-Border Transactions Venture Deals Option Incentive Programmes Documents and Consultations

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