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Due Diligence Process and its Impact on the Deal

Alex Ritchie, A. John Davis, Due Diligence in Mining and Oil & Gas Transactions

Early in their career, all natural resources transactional attorneys are faced with their first due diligence assignment. A partner typically calls a green associate to his office, where the associate finds a box of documents sitting on the floor. “I want you to conduct due diligence on the documents in this box,” states the imposing partner. “What exactly am I looking for?” asks the eager, yet nervous, associate. “You'll know when you find it,” the partner says with a grin.2

In times of more rationale schedules, reasonable billing rates and less client scrutiny of bills and efficiency, an associate could learn diligence by actually doing it, with the partner looking over her shoulder offering wisdom and encouragement until she did know what she was looking for. Although times have changed, many young lawyers reading this paper today likely recall a similar experience, except that the partner today likely would direct the young associate towards a folder containing documents in an electronic data room.

The stresses, tensions and risks associated with due diligence multiply in the context of the big deal - the high-stakes, all-asset, equity and merger transactions. This paper focuses on the due diligence process, particularly in the big deal, where the process can be the difference between a successful and unsuccessful acquisition.3 After introducing changes in