About the importance of litigation due diligence

Investors or buyers study the legal documents of the target company in a specific order. As a result, they may request a price reduction or even refuse to conclude a deal. For the seller side of LDD, this is one of the preparation phases for sale. The sale price may depend on the quality of this preparation.

This procedure is a search of the target organization for responsibilities and obligations in terms of legal costs. That also applies to those who are claimants. Assessing potential liability and dominance in litigation has an essential purpose. In this way, there is a chance to identify possible problems, which are permanent in the target company. This party, in turn, provides reports on threatened or pending legal claims, administrative procedures, etc. As for the settled issues, the buyer’s side receives all agreements, court orders, decisions.

What kind of data does the buyer have after litigation due diligence?

  • information about legal claims (filed and pending)
  • identification of litigations involving the seller
  • issues connecting the seller and the court (prohibitions, decisions, orders)
  • knowledge of litigation insurance coverage
  • correspondence of a lawyer with the company’s auditors

Due diligence is fundamental to both parties. It is a guarantee of transparent cooperation and a satisfactory outcome.

LDD Checklist


  • Information on all litigation and proceedings that the target organization was involved in (over the past five years)
  • A list of judicial or administrative proceedings pending or at risk. That also includes petitions and complaints (copies of these documents)
  • Information about all legal consultants who currently cooperate with the organization and act on its behalf
  • List of all decrees, judicial decisions, prohibitions, other decrees, orders, settlement agreements, arbitrations, and arbitral awards to which the company is subject or obliged

This type of scrutiny makes it possible to check the target organization for legal issues. The results may be the decisive factor in the end. In some cases, even lead to changes in the terms. Timely identification and assessment of risks is the goal of an LDD.