Legal Blog

M & A Nuggets: Stupid Is As Stupid Does

shutterstock_286288565In the movie, Forrest Gump, the main character was asked several times if he was stupid.  Forrest Gump replied “Stupid is as stupid does”, meaning that a person should be judged by his actions, not his appearance.  Similarly, when you are evaluating a seller target, although appearances are important at the outset, it is more important to evaluate the seller’s actions.  On the surface, a seller may seem clean as a whistle.  But only through a detailed and painstaking due diligence process can a purchaser really determine whether the seller’s house is in order and what risks may exist.  The due diligence investigation should review not only the seller’s financial statements, but also the seller’s employee benefit plans, human resources files, insurance policies, employment manuals, workplace safety policies and corporate records, among many other items.  Depending upon the size of the transaction, the purchaser should consider asking its professional advisors (attorneys, accountants and insurance brokers) to assist with the review of these items.  By conducting this diligent review of the seller’s business, and contrary to another saying from Forrest Gump, you will have a much greater likelihood of knowing what you will be getting in the box of chocolates when you purchase the seller’s business. manuggets subscribe2


Glenn D. Solomon Esq. is a principal at the law firm of Offit Kurman and has provided counsel to businesses and business owners for more than twenty-five years, with extensive experience in the purchase and sale of businesses, structuring ownership agreements, and advising companies in financial distress


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