Chapter 1: Transaction Types and Gauging the Extent of Due Diligence 1
Financial transactions between corporate entities are complex processes
involving a substantial amount of internal and external resources, and each
entity has its own specific interests and goals that it is seeking to accomplish
through the transaction. Not surprisingly, there are many different types
of transactions that can be adapted through negotiation to accommodate
the interests of both public and private large, mid-sized and small compa-
nies. Although all types of financial transactions involve some level of due
diligence to allow the acquirer an opportunity to evaluate existing risks,
the transaction type often dictates the level of diligence review needed to
complete a reasonable assessment of the target. This chapter provides a brief
introduction to the major transaction types and explains how the type of
transaction can influence the due diligence process.
General Types of Transactions Involving Medical Product
Companies
Financial transactions can be structured in a variety of ways, including many
nonstandard and innovative deal structures, but the majority of transactions
involving medical product companies fall into one of the following cate-
gories: equity investment, acquisition or joint venture. The sections below
provide brief descriptions of these three general transaction structures.
Equity Investments
Equity investments, whether driven by strategic or financial motivations,
generally involve an investor providing cash to a company in exchange for
shares of the company’s capital stock representing an ownership stake in
1
Transaction Types and
Gauging the Extent of
Due Diligence
Financial transactions between corporate entities are complex processes
involving a substantial amount of internal and external resources, and each
entity has its own specific interests and goals that it is seeking to accomplish
through the transaction. Not surprisingly, there are many different types
of transactions that can be adapted through negotiation to accommodate
the interests of both public and private large, mid-sized and small compa-
nies. Although all types of financial transactions involve some level of due
diligence to allow the acquirer an opportunity to evaluate existing risks,
the transaction type often dictates the level of diligence review needed to
complete a reasonable assessment of the target. This chapter provides a brief
introduction to the major transaction types and explains how the type of
transaction can influence the due diligence process.
General Types of Transactions Involving Medical Product
Companies
Financial transactions can be structured in a variety of ways, including many
nonstandard and innovative deal structures, but the majority of transactions
involving medical product companies fall into one of the following cate-
gories: equity investment, acquisition or joint venture. The sections below
provide brief descriptions of these three general transaction structures.
Equity Investments
Equity investments, whether driven by strategic or financial motivations,
generally involve an investor providing cash to a company in exchange for
shares of the company’s capital stock representing an ownership stake in
1
Transaction Types and
Gauging the Extent of
Due Diligence