by Paul Siegenthaler
author of the highly recommended book "Perfect M&As"
about the 10 main reasons for M&A failure.
Paul highlights poor due diligence as one of the key factors that make M&A transactions fail. I cannot agree more. In the last 20 years I have participated in a number of transactions in which value was destroyed due to poor due diligence.
The main reasons that I see for poor due diligence are:
- Asking the wrong questions. Focusing on details before deciding what actually drives value for the acquisition.
- Disconnect between the deal team and the due diligence team. In many transactions, there is a significant gap between the deal team and the team executing the due diligence whereas the deal team just sees the due diligence findings as hurdles.
- No real business due diligence. Many DD processes turn into a legal/financial/risk audit too early into the process, ignoring the "real" business due diligence.
- Organization of information. Many data rooms do not take advantage of the great deal tools that most virtual data room provide such as organization of folders, Question and Answer, reporting.
What do you think?