Real Estate Due Diligence in M&A Transactions: Title, Survey, Financing, Lease Transferability, Environmental

Description

Most mergers or acquisitions will involve real estate assets. Where real estate represents a significant aspect of the target's business, the due diligence for the M&A transaction should mirror that conducted under a real estate sales contract or a loan commitment. Otherwise, the due diligence requirements will likely be more limited. Counsel must have a thorough understanding of the role that real estate plays in the transaction.

The real estate due diligence process will also vary depending upon the structure of the M&A transaction. In an asset purchase, the purchaser is only liable for those obligations of the seller designated in the acquisition agreement. In a stock purchase or a merger, the surviving company is the successor to assets and liabilities of the disappearing company.

The buyer will often defer some of its due diligence until after the parties sign a definitive agreement. Instead, the buyer may rely on representations and warranties and representations from the target regarding title, survey, environmental, property tax, insurance, and other matters. Assumption of existing leases may be of particular importance to the business; counsel must carefully review lease terms and lease transferability.

Listen as our authoritative panel discusses best practices for real estate due diligence in M&A transactions.