Chairman’s Message
By Jim Jeffries, Chairman M&A Leadership Council
Many companies declare victory on the day of signing the letter of intent (LOI) but beyond that, “it’s just a matter of getting through the diligence!” Whoa! That’s the wrong mindset. The right mindset heard from best acquirers is “our best acquisitions are the ones we never do.” Or “the purpose of due diligence is to show us why we shouldn’t do this deal.”
The urge to merge can be a virus among top management that is brought on by CEO passion, dry powder, competition, poor performance and other factors such as:
- Desire to expand products and services
- Consolidation within the industry
- Game changing technology
- Global expansion opportunities
Before we make each acquisition, we need to understand the value drivers and implications to layout the proper design for due diligence, in other words, we need to get ready. Every deal is different (see my article in the January edition) and understanding the attributes and characteristics of the target will shape our diligence effort. Will this be a carve-out, cross-border, large, small, consolidation, technology or IP deal, etc.? And, what will drive value? Will it be revenue growth, cost reduction, margin enhancement, buy vs. build, capabilities, talent and on and on.
Once a good acquirer has been strategic in its search. They will understand the implications and drivers of value for a target opportunity. Then they can proceed with diligence and avoid the urge to merge.
As companies seek to get better at M&A, there is a growing realization that we need to get much better at due diligence. Even the most successful acquirers acknowledge that while they do a good job of financial and legal due diligence, they are not as good at the broader, more holistic view of business and strategic diligence. With our new partners BDO and our other partners we have significantly modified and expanded the diligence training we offer to reflect both the need for this broader view as well as the implications of operating in our new digital world.
To learn more about due diligence, please join us for The Art of M&A Due Diligence, a unique workshop that brings together diverse M&A experts from organizations like BDO, M&A Partners and Willis Towers Watson to share their insights and experiences.
Topics will include:
- Understanding the acquisition rationale as a context for diligence planning
- The hand-offs from corporate development to comprehensive diligence
- Financial diligence (quality of earnings, working capital, income statements and balance sheet)
- Operational, IT, and HR diligence: getting behind and beyond the numbers
- Managing the diligence effort – the DMO
- What a non-expert needs to know about tax and valuation
- Legal diligence: what you don't know can hurt you
- Redefining diligence in a digital world: cybersecurity and social media
- People issues and risks
- Addressing the seller dynamics
- Dealing with alternative deal types
- Business fit and value assessment
- Bridging from diligence to integration
- Case studies and functional group break-outs
We look forward to seeing you there,
