Due Diligence on cross border businesses Tackling the management, legal system and cultural challenges

Transcription

1 Due Diligence on cross border businesses Tackling the management, legal system and cultural challenges Speaker: Selwyn Black Partner Carroll & O Dea Lawyers Sydney Australia sblack@codea.com.au Website:

2 Due diligence is about making a reasonable investigation before a business decision

3 Due diligence is not only for the acquisition of a business other situations include: (a) a launch into a new market or area; (b) as to a major new customer or supplier; (c) as to the risks associated with any business plan or decision; (d) as to a joint venture partner; (e) as to a proposed distributor, franchisee or other business like associate.

4 Due diligence generally involves balancing the magnitude and probability of a risk with the expense, difficulty and inconvenience of a necessary enquiry, as hypothetically carried out by persons professing the relevant skill.

5 Cross border challenges (a) differences in legal systems; (b) differences in the way laws are interpreted, understood and applied; (c) differences in court processes and in their integrity; (d) cultural issues that may affect the likely outcome in a situation;

6 (e) variations in the extent and integrity of public information; (f) fundamentally different concepts, that are not easily translated even where a common language is used; (g) logistical issues including different time zones and different contact people.

7 Options for input of local counsel Option 1 International law firm (may bring in local associates)

8 Option 2 Retain local law firms directly

9 Option 3 Primerus regional solution model client can retain local Primerus firms throughout the region directly, or ask one of those firms to co-ordinate instructions/ reporting/invoicing and payment of other Primerus firms.

10 Lines of communication Option 1 All through head office

11 Option 2 Through regional delegated co-ordination.

12 Option 3 Co-ordinate with delegate in each jurisdiction

13 Streamlining Common set of definitions and terms for all involved across jurisdictions; Common reporting format; Common approach to issue identification and materiality threshholds

14 Issue identification Driven by value or risk; Issues will not be the same in all jurisdictions; Apart from business specific risks, are there jurisdiction specific risks? Identify. Appropriate briefing including as to future plans and assumptions

15 Co-ordination with technical experts/accountants Managing information flows (two ways at least)

16 What question has not been asked?

17 Reliability of public sources of information including as to vendor/ assets/liability/charges

18 Understanding/assessing the significance of local practice and of local cultural issues

19 Some items to consider (not an exhaustive checklist) Enquiries as to the vendor (and where applicable as to guarantors) Reviewing leases and what to look for Investigating security interests and obtaining releases if necessary Ensuring planning and industrial zones and other laws are appropriate to allow our business to operate

20 When do you need to undertake an environmental audit Checking the accounts and other corporate date Reviewing employment contracts Checking for escape clauses in contracts for IT and other

21 Checking if vendor has litigation on foot and how you should deal with it if there is Checking what s owed on superannuation Checking for third party consents don t avoid doing the obvious Reviewing trading relationships of vendor ensuring supplies remain on foot

22 Inventory control checking the forward order book Enquiries as to the vendor (and where applicable as to guarantors) Plant and equipment Debtors

23 Goodwill Intellectual property Premises Material contracts Title Conditions precedent

24 Regulatory issues Tax Insurance Ongoing management Likely adjustments Relationships with third parties

25 Author: Selwyn Black Website: Phone: Liability limited by a scheme approved under Professional Standards Legislation