Despite some uncertainty over the UK’s new status and trade relationships post Brexit, the UK remains an attractive place for overseas investment. We continue to see a high level of investments from existing and new international clients into the UK. However, there appears to be a changing attitude towards pre-investment due diligence. Where in the past, businesses were often prepared to invest with little due diligence, we are now seeing a higher level of focussed due diligence with businesses less willing to expose themselves to unknown risks.
The legal, financial, tax and commercial due diligence phase of any investment into the UK is a key element in helping to deliver a successful investment for the investor. Often overseas investors will be unfamiliar with UK regulations and general working practices, and simply relying on contractual protections may leave the investor navigating a minefield of issues post-investment.
A due diligence exercise should be well managed and focussed on the key areas of the target business, allowing the investor to understand the strengths and weaknesses of the target; those matters which need to be understood from a commercial perspective and which may feed into business planning and strategy; and where contractually the investor will need protection by way of warranties, indemnities or retentions. In some instances, the outcome of the due diligence exercise could lead to the renegotiation of the key terms of the investment.
A badly managed due diligence exercise can be expensive and inefficient and could potentially jeopardise the deal. Any good due diligence exercise should be scoped with the investor at the outset and meeting the investor’s objectives should be the overriding aim. Typically, a legal due diligence exercise will cover a review of:
The outcome of the due diligence exercise should arm the investor with a route forward and ensure a smooth transition through the remainder of the investment process.
At Clarkslegal, our International Investments team assist a wide range of international clients on investing in the UK. If you would like to discuss any elements of investing in the UK, please contact our team on 01189585321.