Target company legal due diligence checklist
Legal due diligence on a target company is the foundation of any M&A transaction. Gaps in the review can lead to undisclosed liabilities, regulatory surprises, or value destruction post-completion. This checklist provides a structured approach to the key legal workstreams.
This is a 12-step legal due diligence checklist for reviewing a target company in an Australian acquisition. It covers corporate structure, material contracts, regulatory approvals, and key risk areas.
The checklist
Verify corporate structure
Obtain and review the target's ASIC extract, constitution, shareholder register, and any shareholder agreements to confirm ownership and governance.
Review material contracts
Identify and review all material contracts including supply agreements, customer contracts, distribution agreements, and any change-of-control clauses.
Check regulatory licences
Confirm all regulatory licences, permits, and authorisations are current and whether they are transferable or require consent on a change of control.
Review employment arrangements
Review employment contracts, enterprise agreements, and any executive retention or incentive arrangements. Flag termination liabilities triggered by the transaction.
Examine IP portfolio
Review registered and unregistered intellectual property, including trade marks, patents, domain names, and software licences. Confirm ownership and freedom to operate.
Assess litigation and disputes
Obtain a litigation register and review all current, threatened, or recently settled disputes. Quantify contingent liabilities.
Review real property interests
Review all owned and leased real property, including lease terms, option periods, make-good obligations, and any change-of-control consent requirements.
Analyse finance arrangements
Review all loan agreements, security documents, guarantees, and hedging arrangements. Identify any mandatory prepayment or consent triggers.
Check tax compliance
Review recent tax returns, ATO rulings, any current audits, and exposure to duty, GST, or payroll tax liabilities arising from the transaction.
Assess privacy and data
Review data holdings, privacy policies, and compliance with the Privacy Act 1988 (Cth) and any applicable notifiable data breach obligations.
Check competition clearance
Assess whether the acquisition triggers ACCC informal clearance or mandatory notification under the merger control regime.
Prepare due diligence report
Compile findings into a structured due diligence report with a risk matrix, warranty and indemnity recommendations, and conditions precedent for the SPA.
When this checklist applies
Use when conducting legal due diligence on an Australian target company for a share sale, asset sale, or merger.
Common pitfalls
- Missing change-of-control clauses in key contracts
- Overlooking employee entitlement liabilities on completion
- Failing to check FIRB approval requirements for foreign acquirers
- Incomplete IP ownership chain for key technology assets
- Not quantifying contingent litigation exposure
Run this checklist on a real matter
Quillio can review data room documents, flag change-of-control clauses, and generate due diligence summaries across hundreds of contracts. See /practice-areas/commercial or start a free trial.
General M&A due diligence guidance only. Transaction-specific risks require tailored legal advice from qualified practitioners.
Use this checklist on your matter.
Quillio can run this checklist on a specific NSW conveyancing matter — confirm each item, calculate adjustments, and generate the supporting documents. The free trial requires no credit card.
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