Phase 1: Introduction
Hello! This is your Senior Editor at Daily Hangul.
So, you’ve reached the summit of Business Korean. You aren’t just ordering coffee anymore; you are sitting in a data room (or a virtual one), analyzing a target company for an M&A deal.
The Due Diligence (DD) phase, or 실사 (Silsa) in Korean, is arguably the most stressful part of any transaction. It’s where dreams collide with reality. As a foreigner, you might read the documents perfectly, but can you interrogate the data without offending the target company’s executives?
I recall a student of mine, a brilliant lawyer from New York, who almost soured a deal because he kept asking, “Why is this wrong?” instead of using the subtle, indirect phrasing preferred in Korean corporate culture. Today, we aren’t just learning words; we are learning how to dig for the truth without burying the deal.
Phase 2: Deep Dive into Key Expressions
At the C2 level, we move away from native Korean words to Sino-Korean (Hanja) terms that carry legal weight.
1. 우발채무 (Ubal-chaemu)
- Pronunciation: U-bal-chae-mu [Think: ‘U’ as in Uber + ‘bal’ as in balcony + ‘chae’ like check + ‘mu’ like moon]
- Meaning: Contingent Liability
- Editor’s Insight: This is the scariest word in M&A. It refers to debt that might happen (lawsuits, unfulfilled guarantees). If you find this during DD, the deal price changes.
- Situation Check: Strictly Professional. You would never use this at home unless your spouse is hiding credit card bills.
2. 귀책사유 (Gwichaek-sayu)
- Pronunciation: Gwi-chaek-sa-yu [Sounds sharp and official]
- Meaning: Attributable reason; Cause for blame/imputation.
- Editor’s Insight: Instead of saying “It’s your fault” (너의 잘못입니다), lawyers say “Does the 귀책사유 lie with the vendor?” It depersonalizes the blame, making it about the cause rather than the person.
- Situation Check: Formal/Legal Documents. Used in contracts to define who pays damages.
3. 진술 및 보장 (Jinsul mit Bojang)
- Pronunciation: Jin-sul mit Bo-jang
- Meaning: Representations and Warranties (often shortened to ‘R&W’ in English, but fully spoken in Korean contracts).
- Editor’s Insight: This is the backbone of the SPA (Share Purchase Agreement). You will often hear, “이 부분은 진술 및 보장 위반 가능성이 있습니다” (This part has a possibility of breaching R&W).
Phase 3: Textbook vs. Real Life
In the high-stakes world of M&A, efficiency is key, but so is maintaining ‘face’.
| Context | Textbook / Standard Formal | Real Life (In the Meeting Room) |
|---|---|---|
| Asking for missing files | 요청하신 자료가 누락되었습니다. (The requested material is omitted.) | “데이터룸 3번 폴더, 펜딩(pending) 상태인 것 같은데 확인 부탁드립니다.” (Folder 3 seems pending, please check.) |
| Discussing a risk | 이 법적 분쟁은 위험해 보입니다. (This legal dispute looks dangerous.) | “이 소송 건은 딜 브레이커(Deal Breaker)가 될 수도 있겠는데요?” (Using Konglish jargon is very common.) |
| Questioning ownership | 이 특허는 회사의 소유입니까? (Is this patent owned by the company?) | “특허 관련해서, 귀책사유 없는 온전한 소유권(Clean Title)인지 확실한가요?” |
Editor’s Note: Notice the heavy use of English loanwords like “Pending,” “Deal Breaker,” and “Clean Title.” In Korean corporate law, this ‘Konglish’ is actually the sign of an insider.
Phase 4: Cultural Context & Manners
The Art of “Nunchi” in Due Diligence
Even though you are the potential buyer (often considered Gap / 갑 – the superior position), acting arrogant during DD is a rookie mistake. The target company’s employees are already stressed about being acquired.
- The “Soft” Interrogation: Never accuse directly. Instead of asking, “Did you hide this debt?”, say: “재무제표 주석 사항에 대한 추가 설명이 필요해 보입니다.” (It seems additional explanation is needed regarding the footnotes in the financial statements.)
- Eye Contact: In a heated legal debate, maintaining intense eye contact can be seen as aggression. It is okay to look at your documents or the screen while delivering a hard question to soften the blow.
Phase 5: Roleplay Script
Setting: A conference room in Yeouido (Finance District). You (Buyer’s Counsel) are questioning the Target Company’s Legal Team Lead.
Characters:
* Alex (You): Foreign lawyer, C2 Korean speaker.
* Team Lead Kim: Target company legal lead, defensive.
Dialogue:
(Alex puts down a document gently but looks concerned)
Alex: 팀장님, 주요 자산 목록을 검토하다 보니, 3년 전 매각된 토지에 대한 우발채무 리스크가 완전히 해소되지 않은 것 같습니다.
(Team Lead, looking at the major asset list, it seems the contingent liability risk regarding the land sold 3 years ago hasn’t been fully resolved.)
Kim: 아, 그 건은 이미 법률 자문이 끝난 사안입니다. 소멸시효도 지났고요.
(Ah, legal consultation on that matter is already finished. The statute of limitations has passed too.)
Alex: 네, 자문 내용도 확인했습니다. 하지만 귀책사유가 명확하지 않아서, 만약 제3자가 소송을 제기하면 방어 논리가 약해질 수 있습니다.
(Yes, I checked the consultation. However, since the attributable reason isn’t clear, if a third party files a suit, the defense logic might be weak.)
(Alex smiles slightly to reduce tension)
Alex: 이 부분만 명확히 소명해 주시면, 보고서에는 ‘리스크 낮음’으로 기재할 수 있을 것 같습니다.
(If you can just clarify this part clearly, I think I can mark it as ‘Low Risk’ in the report.)
Phase 6: 10-Second Shadowing
Let’s practice a complex sentence often found in Due Diligence Reports. Focus on the pauses /.
“본 실사 과정에서 발견된 / 중대한 법령 위반 사항은 없으나, / 잠재적인 우발채무에 대한 / 구체적인 진술 및 보장이 필요합니다.”
“Bon silsa gwajeong-eseo balgyeondeon / jungdaehan beomnyeong wiban sahangeun eopseuna, / jamjaejeogin ubal-chaemu-e daehan / guchejeogin jinsul mit bojangi piryohamnida.”
(While no material violations of laws were discovered during this due diligence, specific representations and warranties regarding potential contingent liabilities are required.)
Phase 7: FAQ & Troubleshooting
- Q: Can I use “당신” (Dangsin) to refer to the other party in a contract?
- A: NO! In spoken Korean, “Dangsin” is fighting words. In written contracts, you might see “갑” (Gap) and “을” (Eul). In conversation, refer to them by their company name (e.g., “A사 측에서는…”) or job title (e.g., “팀장님께서는…”).
- Q: Is it okay to use English legal terms like ‘Indemnification’?
- A: Yes. Most Korean lawyers prefer “인뎀” (Indem) over the long Korean word “면책/보상”. It sounds more professional in this specific context.
Phase 8: Wrap-up
One-Liner Summary:
Due Diligence is about finding the ‘Gwichaek-sayu’ (Fault) and ‘Ubal-chaemu’ (Hidden Debt) politely but firmly to ensure the ‘Jinsul mit Bojang’ (R&W) are solid.
Action Mission:
Next time you read a business contract (even a Terms of Service for an app), try to find the “Indemnification” or “Liability” section and translate it mentally into “귀책사유” or “손해배상”.
Phase 9: Quiz
1. What is the most appropriate term for “hidden debt that might occur in the future”?
a) 확정부채 (Fixed Liability)
b) 우발채무 (Contingent Liability)
c) 외상매입금 (Accounts Payable)
2. How should you address the opposing counsel during a meeting?
a) 당신 (You)
b) 변호사님 / 팀장님 (Mr. Lawyer / Mr. Team Lead)
c) 야 (Hey)
3. Which term refers to “Representations and Warranties”?
a) 진술 및 보장
b) 계약 해지
c) 손해 배상
(Answers: 1-b, 2-b, 3-a)
