Due Diligence: What Are Salient Terms?

Due Diligence

In corporate transactions, junior lawyers are often tasked with reviewing contracts and summarising salient terms for inclusion in legal due diligence reports.

For those new to legal due diligence, a frequently asked question is, “What do you mean by salient terms?”.

Generally, salient terms include information that investors need to make informed decisions about their investments, as well as terms that affect the transactions.

In M&A transactions, salient terms include details related to:

  • date, parties, nature/purpose of the contracts
  • consideration and mode of payment
  • duration of contracts
  • changes in shareholding, control, management, or directors of the target company
  • obligations imposed on the target company, such as outstanding warranties and indemnities
  • unfavourable termination clauses in contracts with customers/suppliers
  • unusual or onerous clauses

Summarise the salient terms without changing their meaning. Don’t copy verbatim into the report.

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#mergersandacquisitions

This post was first posted on LinkedIn on 18 January 2024.

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