Anjana D. Patel, a Member of the Firm in the Health Care and Life Sciences practice, in the firm’s Newark and New York offices, authored an article for the Governance Institute’s BoardRoom Press titled “Hospital and Health System Mergers and Acquisitions: Key Legal Issues for the Board.” (Read the full version – membership required.)
Following is an excerpt:
Another important aspect of a board member’s exercise of his or her fiduciary duties arises in connection with due diligence. As a board member of a buyer, it is critical to ensure that extensive and detailed due diligence is conducted into the seller’s operations, financial condition, legal and regulatory compliance, workforce, medical staff, facilities, and community standing. Moreover, a proactive board will not only conduct due diligence on the target, but also on themselves to ensure that both organizations are a good fit for each other and to ensure that both organizations are not brining major liabilities to the transaction.
Due diligence not only protects the buyer, it can also protect the seller. Very often, the seller will conduct “reverse” due diligence on the buyer. This is especially true if the board’s actions will be scrutinized by the state attorney general or other regulators, as well as community interest groups. By engaging in a review of the buyer, including its financial wherewithal, strategic direction, past acquisitions, and its successes and failures, the seller’s board will also have a better sense of whether the buyer is a good fit, bother operationally and culturally.
