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European Biopharmaceutical Review

The Rewards of Diligence

Ben Rapinoja and Anne Korpi-Filppula of Borenius & Kemppinen, attorneys at law, explain legal due diligence and how to avoid key legal risks in the life science industry

Legal due diligence (LDD) is a process of gathering information and assessing risks, liabilities and possibilities in connection with a business transaction. LDD is a necessary and important part of many business transactions including mergers and acquisitions, venture capital investment, licences and other financial arrangements, as well as initial public offerings.

LDD is usually part of a larger due diligence that critically reviews and analyses the financial, management and operational conditions of a company. From a business perspective, due diligence includes an evaluation of the management team, resources and verifying customers and markets and, from a financial perspective, it includes a thorough examination of the accounting books of the target company. The aim of LDD is to pinpoint the legal risks in the planned transaction or investment, as well as to determine the value of the target company or business.

LDD needs to be tailored according to the specific transaction in question. In order to do this effectively, it is essential to understand the nature of the potential transaction, as well as technological aspects and the business strategies of the companies in question. For instance, in any deal with a substantial technology component, an important focus for LDD is intellectual property rights. One must look beyond the concerns of traditional due diligence to examine a companyís technological assets.

The material that the due diligence process discloses should cover all relevant aspects relating to the target company and its business. Based on business goals and the objectives of the transaction, additional information can be requested directly from the target company. So-called management interviews are commonly used to identify the data relating to non-published information.

LEGAL RISKS IN LIFE SCIENCES BUSINESS

Legal risks relate in many cases to the intellectual property rights, as they form an instrument by which the protection of the results of R&D is organised. Patents generally constitute the most important form of intellectual property rights in a life sciences transaction.


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B&K partner Ben Rapinoja advises on intellectual property-related questions with particular emphasis on the life sciences and pharmaceutical industries. His practice mainly concentrates on commercial contracts, corporate and financial transactions, especially in the life sciences sector and dispute resolution, where Ben has particular experience in the field of patent and trademark litigation. He has represented the Finnish Government in various expert groups of the EUís institutions, the European Patent Organisation and international organisations in the field of IP (WIPO, WTO).

B&K lawyer Anne Korpi-Filppula advises in IP and IT, as well as on questions relating to contracts and dispute resolution. She has a Master of Law degree from the University of Helsinki and she has also studied Law at the University of Leuven, Belgium.

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Ben Rapinoja
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Anne Korpi-Filppula
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