Your most difficult experiences with DD
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What have been your most difficult experiences with a DD project?
I just completed mine. The client was a mid-sized private company. Essentially, the buyer did very little due diligence before purchasing a competitor, and he wanted my help integrating the companies into a single operation. (This was one year after the purchase.) Based on his timelines, we completed DD on the most relevant items impacting post-merger integration in record time. It was a fascinating experience.
The quality of DD makes a difference in post-merger integration!
I think in private companies the due diligence is easier given the fact that the buyer should have unlimited access to books. in a case of a public company the story is different given that the list of due diligence should be submitted and depend on the target management approval and actually you can to nothing about that.
Our most difficult task was related to verification of automated systems/technology and how it captured data/statistics/past results, and how those reported results aligned with our methods of reporting in order to create apples/apples comparison.
My most difficult experiences in DD was a private bancassurance company DD project. Limited human resources worked on an extremely tight timeline with bits and pieces of large amount of data.
Vendors blurring reality about critical information such as a contract with a Fortune 100 which is actually only an “approved supplier” contract, Government grants which were pending instead of obtained, etc. Lying by omission on the real life expectancy of the company without adequate funding.
I’ve been part of HR Due Diligence and we could clearly see company’s cultural differences in how things were done. Company A being largely employee focused with a large number of benefits being provided to it’s employees, going over and above the industry standards vs Company B which was doing bare minimum or below industry average. The harmonization of benefits was a tricky piece and we could anticipate dissatisfaction.
Thank you for sharing this experience. It highlights an important lesson – DD done after the deal closes is much harder and more expensive than doing it properly before. The most difficult part in that situation is usually discovering issues you can no longer negotiate on, since the deal is already signed. This is why I believe the quality of pre-deal DD directly determines how smooth the integration will be. Skipping it to save time almost always costs more in the end.
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