M&A due-diligence is an essential process that assists buyers in assessing the commercial, financial, and legal aspects of the target businesses prior to completing an acquisition. The information gained through due diligence is critical for a successful integration and can uncover benefits of a board of advisors potential threats or opportunities that could otherwise be overlooked.
While each M&A deal is unique however, there are some activities that are common to all deals. These include gathering and reviewing financial documents, evaluating regulatory compliance and assessing the performance of operations. Due diligence is also possible in specific areas like environmental, human resources, and intellectual property.
Due diligence can take a few months and be a burden for M&A teams. This is especially so when the company that is buying must complete a variety of complex tasks within a short time. The time constraints increase the risk of overlooking critical risks, taking rushed decisions, or ignoring crucial warning signs.
It is important to realize that a due-diligence program requires careful consideration of confidentiality. M&A teams should be aware that the selling party and their attorneys are bound to protect confidential and sensitive data in accordance with the conditions of a confidentiality agreement. It is often necessary to employ professional advisors in order to oversee this process and to ensure that all information collected is accurate and relevant.
Due to the delicate nature of information collected during due diligence, it is important to organize and store documents in a way that allows them to be searched. Sorting documents alphabetically or numerically, for example will make it easier to find the appropriate document.