Management Liability Based On Inadequate Due Diligence In Corporate AcQuisitions

In the context of corporate acquisitions, the managing directors of the acquiring company are regularly faced with the question of the scope of the "due diligence," the review of the target company. Sometimes no due diligence at all is performed, such as in the context of a share purchase via the stock market. However, if the managing director makes the wrong decision regarding due diligence, it may lead to significant liability. The comments in this article relate to the managing directors of German limited liability companies but also apply to the boards of directors of stock corporations and generally to the management of limited partnerships that have limited liability companies as general partners. In the event the buyer uncovers risks that were unknown prior to the acquisition, or the business of the target company does not do as well as expected, the managing director may be reproached for