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Litigation and Contingent Claims History Needed for M&A Due Diligence

Understanding Seller’s history with lawsuits, both as a defendant and plaintiff, is another must-know M&A due diligence area for any Buyer. The following list lays out some important litigation info:

  • Schedule of all litigation, arbitration, and other proceedings to which the company is a party or by which its properties are bound and all pleadings and other material papers related thereto existing at any time during the reporting period.

  • Listing and description of all pending or threatened claims, lawsuits, arbitrations, or investigations involving a claim for relief against the company, any subsidiary, or any of their respective officers or directors.

  • Description of settlements of litigation, arbitration, and other proceedings during the reporting period and copies of settlement agreements, releases, and waivers related thereto.

  • Description of bankruptcy proceedings in which the company is a creditor or otherwise interested.

  • Description of any contingent liability of the company not referenced herein or in the financial statements provided hereunder, including those arising from or out of

    • Contracts and agreements.

    • Price redetermination, renegotiation, or escalation clauses.

    • Sales subject to warranty or service agreements.

    • Sales to foreign buyers.

    • Product liability.

    • Unfunded pension liability, other retiree health or insurance benefits, or similar matters.

    • Antitrust, Robinson-Putmon, or other trade regulation matters.

    • Equal opportunity/anti-discrimination matters.

    • Environmental matters.

    • Any other matter which, in the judgment of the company, is significant with respect to the company or which should be considered and reviewed in making disclosures regarding the business and financial condition of the company.

  • Listing of unsatisfied judgments, orders, and decrees to which the company is subject.

  • Copies of all orders, injunctions, judgments, or decrees of any court or regulatory body applicable to the company or any of its properties.

  • Copies of all agreements whereby the company agrees to indemnify or hold harmless another person or entity for claims against that person or entity.

  • Schedule of any litigation involving an officer or director of the company concerning bankruptcy, crimes, securities law, or business practices at any time during the reporting period.

  • Description of any investigations of the company, pending or threatened, by any governmental authority.

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