Key Focus Areas and Fundamental Methods of Legal Due Diligence in M&A and Restructuring

Target enterprises involved in M&A and restructuring may adopt various organizational forms—such as companies, partnerships, or state-owned enterprises. For ease of exposition, this article uses company-form enterprises as examples. Moreover, whether the target company is an acquisition target or a prospective listing/issuing entity, the core focus areas of legal due diligence remain essentially identical and broadly applicable. I. Types of M&A and Restructuring 1. Regulated M&A and Restructuring Broadly speaking, regulated M&A and restructuring refer to transactions subject to regulatory oversight, requiring approval, filing, or information disclosure with relevant regulatory authorities. Such transactions primarily include: (1) Major asset restructurings of listed companies—regulated by the China Securities Regulatory Commission (CSRC) and stock exchanges, including share-issuance acquisitions (e.g., backdoor listings) and cash acquisitions; (2) Major asset restructurings of NEEQ-listed companies—regulated by the National Equities Exchange and Quotations (NEEQ); (3) M&A and restructuring of state-owned enterprises—subject to supervision by state-owned assets regulators; (4) Cross-border M&A (both outbound and inbound investments)—overseen by the National Development and Reform Commission (NDRC), foreign investment authorities, and foreign exchange regulators; (5) M&A and restructuring involving other regulated industries or entities—such as finance, securities, and healthcare; (6) Multi-regulated M&A and restructuring—combinations of the above categories. 2. Unregulated M&A and Restructuring These are transactions falling outside the scope of regulated M&A and restructuring. As they operate entirely within normal market mechanisms, they may also be termed market-driven M&A and restructuring. II. Impact of Different M&A Rules on Legal Due Diligence 1. Generally, regulated M&A and restructuring are governed by broader—and often more complex—regulatory frameworks than market-driven transactions. 2. Legal due diligence for regulated M&A focuses primarily on regulatory compliance: ensuring adherence to requirements for approvals, filings, and disclosures. In contrast, legal due diligence for market-driven M&A centers on transaction objectives—identifying and mitigating transaction risks, and informing transaction decisions and even pricing. 3. The scope of due diligence in regulated M&A is relatively well-defined. Moreover, given the concurrent involvement of other intermediaries (e.g., securities firms, auditors, appraisers), lawyers face regulatory risk but enjoy greater overall risk controllability. In market-driven M&A, however, the absence of clear professional guidelines for legal due diligence means lawyers must determine the scope and content based on experience, transaction objectives, and the principle of due diligence. If clients decline to engage financial advisors, auditors, or appraisers—despite lawyers’ disclaimers—lawyers’ knowledge limitations may hinder their ability to comprehensively and deeply uncover issues and risks at the target company. Overall, lawyers bear greater pressure and higher expectations. III. Impact of Commercial Objectives on M&A Transactions and Legal Due Diligence 1. Commercial objectives influence—or even determine—the transaction structure and method: (1) Acquiring qualifications or entering restricted sectors (including backdoor listings): typically achieved via equity acquisition; (2) Acquiring core assets while shedding personnel liabilities: typically pursued through asset acquisition; (3) Retaining original shareholders and key personnel, or providing capital support: partial equity acquisition or capital increase (injecting funds into the target enterprise); (4) Gaining market channels and retaining key personnel while minimizing financial impact or public disclosure: employment transfers combined with equity incentives; (5) Tax and cost optimization considerations (e.g., differing tax rates for equity vs. asset transactions; tax implications of different payment methods). 2. Therefore, matters tied to commercial objectives constitute critical focus areas for legal due diligence. Legal due diligence serves not only to verify legality but also to support and advance commercial objectives.

[Special Topic: Advanced Manufacturing] Practical Techniques for Legal Due Diligence in Investment and M&A of New Materials Enterprises

To implement the national 13th Five-Year Plan Outline and the 'Made in China 2025' initiative, and in accordance with the requirements set forth in the 'Notice on Issuing the MIIT’s 13th Five-Year Plan System' (MIIT General Office Document [2015] No. 24), the Ministry of Industry and Information Technology (MIIT), jointly with the National Development and Reform Commission (NDRC), the Ministry of Science and Technology (MOST), and the Ministry of Finance, formulated the 'Guidelines for the Development of New Materials Industries' (MIIT Joint Regulation [2016] No. 454), officially released on January 24, 2017. The Guidelines emphasize strengthening the collaborative innovation system for new materials industries, accelerating early-market cultivation for key new materials, and launching the 'Internet + New Materials Initiative', among other strategic directions. When responding to industries encouraged by national policy, lawyers should proactively monitor such sectors, promptly identify associated legal issues, and contribute to improving relevant laws and regulations. No. 2 Practical Operational Points for Legal Due Diligence of New Materials Enterprises I. Communication Principles In practice, communication with the target of legal due diligence is the most direct and effective way to obtain corporate information. Only with full cooperation and assistance from the target enterprise can lawyers successfully complete due diligence. Achieving seamless cooperation requires effective communication—making it indispensable and worthy of emphasis. How can communication be conducted effectively? (1) Identifying Common Ground to Build Trust with the Target Enterprise Legal due diligence is meticulous work demanding close collaboration between lawyers and the target enterprise. When conducting due diligence on an unfamiliar enterprise, establishing trust is the first priority—facilitating smooth progress of subsequent work. It is essential to help the target enterprise understand both the purpose and rigor of due diligence. Once foundational trust has been established, formal tasks may commence. However, enterprises may lack clarity about the purpose of the investigation or be uncertain how best to cooperate—sometimes perceiving repeated document requests as burdensome or unnecessary, leading to impatience or skepticism. In practice, lawyers may already have obtained certain corporate information online or from government agencies, yet still request original documents for verification. Such requests may puzzle the target enterprise. Lawyers should therefore clearly explain the legal obligations of 'diligence and prudence' and 'verifying authenticity of materials'—appealing both to reason and empathy. Accordingly, lawyers are advised to thoroughly clarify the purpose of the due diligence to the target enterprise at the outset, maintain timely communication regarding document submissions, and reasonably explain any instances of duplicate document requests—thereby facilitating smooth progress. (2) Conducting Preliminary Work Before Advancing Communication Effective communication with the target enterprise should focus on complex project discussions. For straightforward documentation, lawyers should collect required materials prior to engaging the target enterprise—reducing overall due diligence time and enhancing efficiency, while simultaneously easing the target enterprise’s workload and enabling its staff to concentrate resources on researching and gathering complex information. This approach strengthens mutual trust and rapport during due diligence. (3) Selecting Appropriate Communication Contacts During due diligence of the target enterprise, lawyers should promptly record contact information for key personnel who possess in-depth knowledge of the enterprise—including the Chief Financial Officer, department heads, and the General Manager.

Kahn Swick & Foti Investigates Fairness of Element Solutions Sale to Solstice Advanced Materials

Jul 8, 2026

KSF is investigating the proposed sale of Element Solutions Inc to Solstice Advanced Materials, examining whether the $10 cash and stock consideration adequately values the company. Element shareholders are expected to own approximately 44% of the combined entity post-merger.

Business Wire

2026-04-03

A Look at Element Solutions (ESI) Valuation After Recent Media Focus on Growth and Peer Comparison

2026-04-04

Element Solutions Upgraded to 'Buy' by Wall Street Zen

2026-04-05

How Investors May Respond to Element Solutions (ESI) Leadership Shift and Renewed Media Spotlight

2026-04-12

Wall Street Zen Downgrades Element Solutions (NYSE:ESI) to Hold

2026-04-13

Iridian Asset Management LLC Purchases 71,686 Shares of Element Solutions Inc.