If there is one thing I have learned from advising clients with respect to literally hundreds of mergers and acquisitions over the past three decades it is that it is extremely important for an acquiror to perform comprehensive due diligence regarding all acquisition prospects.
Why Perform Due Diligence?
First and foremost, to avoid acquiring businesses that are not what the acquiror wants in the first place.
If, during the course of due diligence, an acquiror uncovers information which provides a legitimate basis for not making the acquisition in the first place, so much the better.
Second, so the acquiror can assess the acquisition risk and then appropriately allocate it in the course of negotiating the terms and conditions of the purchase agreement for the purchase of the acquisition prospect.
How is Due Diligence conducted?
I recommend that it be conducted in waves, so that the acquiror gets deeper into the details regarding the acquisition prospect after the threshold issues are satisfactorily addressed.By proceeding in this staged manner, an acquiror can often avoid doing a complete due diligence review of an acquisition or merger prospect it will ultimately not be acquiring.
I am always going to recommend a due diligence review that is comprehensive and thorough. It is important to investigate everything regarding the acquisition prospect at the very least those all of the items that are material given the scope of the acquisition.
Because performing due diligence involves assessing acquisition risk and requires judgment, I recommend that due diligence be performed by professionals with sufficient experience and judgment that they are able to identify risks, carefully evaluate and assess them etc.
I advise all of my acquiror clients to never underestimate the importance of performing comprehensive and thorough due diligence regarding the acquisition prospect.
Energy and persistence conquer all things. ~ Benjamin Franklin