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Due diligence requirements
What due diligence is necessary for buyers?
There is no mandatory requirement to conduct due diligence reviews in M&A transactions, but this has become the norm. Due diligence reviews are typically conducted by the relevant professional advisers (eg, legal, financial, tax and technical advisers) as a combination of document reviews and Q&A sessions with the target’s management.
While there is no requirement to carry out due diligence, a buyer’s decision not to conduct a due diligence review despite the seller having given it the opportunity to conduct one may affect the buyer’s ability to file a claim against the seller for a warranty breach if the basis for the claim would have been disclosed in the data room and the seller did not withhold relevant information.
What information is available to buyers?
In addition to the information disclosed by the seller in the data room, the buyer may take advantage of relevant information available in public databases. The articles of association, financial statements and target’s details (eg, registered address, board, managing director, representation rights, share capital and information on registered floating charges) are available at the Patent and Registration Office. The Title and Mortgage Register contains relevant information on real property.
In addition, public companies will make available interim reports, information required under the company’s disclosure obligations and minutes of shareholder meetings.
What information can and cannot be disclosed when dealing with a public company?
If a public company’s board has received a serious takeover bid and the board deems that bid to be in the interests of shareholders, the Helsinki Takeover Code provides that the target’s board allow the bidder to conduct a due diligence review concerning the target. In such cases, the board must see to it that confidentiality and insider issues are properly agreed with the bidder.
The target may also, in certain cases, disclose inside information to the bidder. However, use of this inside information by the bidder is prohibited. If the bidder receives inside information during the due diligence process, the bidder can neither make public the bid nor purchase shares outside the bid before the received inside information has been made public.