perjantai 7. kesäkuuta 2013

Due Diligence or risk analysis

Due Diligence or risk analysis

How to handle it in a minority language country

Due diligence investigation can be life saving in a cross border MA transaction. The trick is not to overdo it and at the same time to dig out all information relevant to the transaction. Well, this is how things look from the parties’ perspective. The performers’ point of view  i.e. the attorneys’ or accountants’, is somewhat different. It is in their billing and professional interest to suggest a due diligence investigation that is as thorough as possible. Which carries with it the risk of losing focus and the due diligence investigation becoming worthless and very expensive.

Finland is a minority language country meaning that many official documents are drafted in Finnish. It is a language that is barely known outside of the country. Although English is well mastered in Finland it does not change the fact that you need to know Finnish as well. For a transaction a typical solution would be to hire a local law firm and accountants for the due diligence. The issue is then handled from a technical perspective assuming that google translation method would work. Most of us have noticed that it does not. Many reports will be prepared but the information is not there. The due diligence thus performed did not help our drafting of agreements.

A solution could be to include a member of the drafting team in the due diligence team. That link between the teams should be in a position to make sure that questions of the drafting team are correctly understood and, also, that answers provided by the due diligence team can be understood by the drafters. Obviously, in real life, things would not go this smoothly. Operation of a due diligence team can be a business secret and, therefore, a new temporary member would not be welcome.

by Tina Taivaloja

lecturer, doctoral student at University of Helsinki