Deal or No Deal
By Jim Jeffries, Chairman of the M&A Leadership Council
Often the best deals are those we never do. In July, the Council in partnership with BDO will be hosting The Art of M&A Due Diligence in beautiful San Diego. There we will address some misunderstandings that many members of the M&A community have about the real purpose of due diligence. Ask people assigned to due diligence teams, “What are we trying to achieve during diligence?” And many would state that the purpose is to validate the numbers and determine the fit. In other words, their objective is to show how to make the deal work.
Traditionally, the purpose of diligence has been to focus on materiality and risk. Trying to determine if the assets are overstated or the liabilities understated, they overlook the business and strategic fit. But the best acquirers look for reasons not to do the deal. Most corporate leaders would agree that there are acquisitions that they never should have done and wish someone would have been more candid regarding the strategic findings.
As our co-founder Jack Prouty has said, “The two best words to use during the due diligence process are ‘So what?’ What are the integration implications, synergies opportunities, or the magnitude of risk based upon this piece of information collected?” Just gathering information and delivering exhausting checklists to the target company will do little to determine if the deal is worthwhile. Instead, the focus should be on discovering the most likely issues that will be encountered, and evaluating if those are risks worth taking. Throughout the diligence process, be sure you are also seeking out reasons why the deal would not be a good choice for your company.
I hope to see you in San Diego on July 24-26, 2018 to learn Due Diligence best practices and to discover the best tools being used today by the leading companies in M&A.