Due diligence in Indian acquisitions operates as the critical risk assessment mechanism informing valuation, transaction structuring, and contractual protection frameworks. The scope and depth of due diligence must be calibrated to the transaction context, target profile, and acquirer risk appetite, while ensuring comprehensive coverage of material risk categories.
Corporate and governance due diligence establishes the foundational assessment of the target's legal existence, corporate structure, and governance framework. This encompasses verification of incorporation documents, analysis of constitutional documents for restrictive provisions, review of board and shareholder minutes for irregular actions, and assessment of compliance with corporate governance requirements. Particular attention must be directed to related party transactions, director responsibilities, and minority shareholder arrangements.
Regulatory compliance due diligence assumes particular significance in the Indian context given the complexity of the regulatory landscape. This encompasses sector-specific licenses and approvals, environmental compliance, labour law compliance, foreign exchange compliance, and tax compliance. The due diligence must not merely identify current compliance status but assess the sustainability of compliance and potential exposure from historical non-compliance.
Litigation and dispute assessment requires comprehensive review of pending, threatened, and potential litigation across all forums. This includes civil suits, criminal proceedings, regulatory actions, arbitrations, and administrative proceedings. The assessment must evaluate not merely the quantum of claims but the likelihood of adverse outcomes, potential consequential effects, and implications for business continuity.
Contractual due diligence examines the target's material contractual relationships, identifying provisions that may be affected by the transaction or that may constrain post-acquisition operations. Change of control provisions, exclusivity arrangements, most favored nation clauses, and termination triggers all require careful analysis. The assessment should extend beyond identification to evaluate the commercial significance and renegotiation potential.
The culmination of due diligence findings in the transaction documentation requires systematic translation of identified risks into appropriate deal mechanisms. This encompasses representations and warranties, indemnification provisions, closing conditions, and escrow arrangements. The due diligence process should inform not merely risk identification but risk allocation strategies in transaction negotiations.