Effective Due Diligence encompasses much more than just financial numbers!
Initiating an M&A process requires a solid rationale, supported by a Due Diligence process. The notion of “because we can” is insufficient and likely to lead to failure.
Understanding the financials of the target company is crucial as it guides the pricing strategy. However, it should not be the sole consideration.
Other critical elements that require thorough due diligence include the existing portfolio, intellectual property (IP), customer base, employees, and company culture. These aspects are vital for achieving successful integration.
While the first three elements are often recognized, they may not always receive the attention they deserve. The people and company culture are frequently overlooked, which becomes evident in the months following the announcement when valuable employees start leaving the organization. This is especially detrimental if the acquisition was based on their expertise.
M&A processes are inherently stressful for all involved, and time is often of the essence. However, this should not justify cutting corners. The repercussions of such shortcuts are quickly felt.
Effective due diligence is comprehensive, encompassing financials, assets, and human factors, ensuring a smoother and more successful integration.