Internal Merger
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With the current economic conditions, some global companies are conducting their internal merger to improve market competitiveness ie. bringing 2 independent businesses together. Should the due diligence be similar to that in a regular M&A ? What are the measures of success ?
That is a great question!!
Actually my previous workplace is consolidating businesses as we speak. I am certain that the only work going into it is cost reduction/headcount reduction and burying poor financials of one business into a consolidated statement where it cannot be seen. If you never have the same baseline then how can shareholders see the poor performing businesses right?
The real question here could be: if the intent of the merger is to bury skeletons, even if due diligence should happen (likely it does) would it ever happen??
My my company, we continue to take our time when it comes to integrating businesses. When it comes to trading terms or even financial shape these businesses can be quite different from the larger organization. Bringing in some rigor to processes is a solid first step before full integration.
I echo Rachel’s point which is exactly the case in my previous company especially the “burying poor financials of one business into a consolidated statement where it cannot be seen” lol. I think we can only learn from these cases and stop them when we are at the position to decide such mergers go or no go.
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