Setting aside the probability they will find any out and out attempt to cheat the buyer, there seems to be some misinterpretation about the proper role of the M&A Due diligence International team. They are going to function an assessment of the propose business, but to what purpose? There is often an anticipation that the global due diligence team will recommend whether or not the financier should move ahead with the merger or acquisition of the aimed business… “this is a great deal, you should grab on it right away”. Many of our customerslook surprised when we tell them it is not our job to choose if this is a better investment or not. “But you will tell us the good, the bad and the ugly… right?” Well, not really.
The role of the International due diligence firm steam is to make sure that the investor has the details they require to enter into a deal with their eyes fully opened about the business, allowing the investor to make an proper decision about the investment. The due diligence team’s job is to help or guide the business to discover the real facts about its past, present and future operations. Knowing whether these inside information are good, bad or ugly or whether the business will be a good investment are decisions only the financier should make. The purpose of the assessment is to gather the details that will support the investors factual decision. The investor must know how to weigh the details and information based solely on his or her goal and strategy. The Global due diligence investigationswill be more fruitful if they are knowledgeable of the investors goals but this is not always the case, nor does it need to be for them to complete their job. Knowing the investors purposeguides the team prioritize their time.
Let usconsider that the operations due diligence team noticed that a business has a low defined sales procedure resulting from a low sales and marketing planning. Is there a danger that the business could fail to meet its advertised projections or is this an chance for an investor whose strategy is to focus to the target business with another business that already has a great sales infrastructure in place? The evaluation team needs to show the facts and the investor needs to decide how to weigh them. This could either be a huge investment or a very poor one but it is not the duty of the global due diligence team to decide which.
The standard should not change for bigger corporate acquisitions either. On behalf of an individual investor, there may be an obtaining committee responsible for giving the final decision. While members of the obtaining committee may be involve in the evaluation, there should be separation between the obtaining committee and the evaluation team, even if it is only in the charter of their activities. There should be an complete separation if the obtaining team is compensated on the acquisition because of the promising conflict of interest. The role of the international due diligence team requires to be clearly understood by all participants.