Newco Construction Investing Term Paper

Newco Construction and investing with due diligence

According to the Internet dictionary Investopedia, the legal contractual concept of 'due diligence' from an investor's point-of-view is simply the "care" in which "a reasonable person should take before entering in an agreement or transaction with another party," such as when considering an investment on the part of a venture capitalist. ("Due Diligence," Investopedia, 2005) A due diligence audit is performed of a corporation, to confirm all material facts in regards to an investiture of capital, such as one that is currently being performed of the Newco Construction Company, to mitigate the risks of investing capital and to ensure that full disclosure of all company assets and potential problems are made aware to both parties involved, both the investors and the company's board of directors. Such an audit was performed of Newco Construction, and the company seems to pass all tests of the potential warnings or red flags that might arise to dissuade one against this investment. Instead, Newco seems to have shown that it is a company that is both open, stable, and with great financial potential for growth.

Offers to purchase or invest in the assets of Newco were rendered dependent upon the results of such a due diligence analysis. To review, a due diligence analysis usually includes reviewing all financial records of the company in addition to anything else deemed material to the sale, such as the company's current organizational structure (or lack thereof), past track record of quality service and development to its customers, and compliance with currently existing laws in the industry, in this case that of the construction industry. Other items that could be considered in a due diligence analysis in the future could be Newco's ability to purchase new materials and undertake new construction, given potential legal or financial developments in the area, as well as other regulatory and economic developments that could affect the purchased entity or the seller, even after the initial investment was completed and agreed upon. ("Due Diligence," Investopedia, 2005)

Black's Law Dictionary states that the principles of due diligence are "buyer beware," or in Latin, caveat emptor, or to be forewarned is to be forearmed.In other words, from an investor's point-of-view, knowledge about the potential investment is power. Black's concept of due diligence is also used to adjust the price of a contractual agreement, as well as to assess and manage risk of a potential agreement. As in the current investment and purchase in shares of the Newco Construction company, these principles will invariably came into play when rendering the analysis -- always the eye of the due diligence auditor is upon the future for the investor, as well as the successes and legal compliance of the present and past. ("Due Diligence," GLR, 2005)

In terms of its ingenuity as a company, Newco Construction has many attractive features for development. It boasts a wide range of local, regional and national clients covering everything from office buildings, retail space and religious facilities, to educational institutions, recreational facilities and warehouses. Newco has, since its inception, evolved to become a major player in the commercial, institutional and municipal sectors of the construction industry. The company's services now include such diverse responsibilities as "tender quotations, design-build, lease-back, joint venture participation and construction management," thus there is much room for growth and development. (Newco Construction, Official Website, 2005)

Recently, Newco Construction was approached to design an optometrists' office and optical shop. According to the "Projects" section of the company's official website, the client required that the building have a storefront look which fit in with the best of the older neighborhood surroundings. Unfortunately, the available site for the building was very restrictive. The client was concerned about the ability of the customer's clientele to approach to the building from all of the directions of available….....