Resolving the Issues
When the responses to the due diligence questionnaire are received from the target company, the party conducting due diligence needs to determine how to address any issues that have been uncovered as a result of the investigation. Assuming the issues do not lead to a termination of the deal, the parties can then try to negotiate solutions to the problems that have been discovered. As discussed in this chapter, possible solutions include preclosing conditions, an adjustment of the company valuation (and thus the purchase price), and postclosing covenants and agreements. The contract should also include enforcement mechanisms that can be invoked in the event of a breach of a preclosing condition or covenant, including establishing an escrow, granting a right of repurchase, postclosing price adjustments, and indemnification.