Failed Due Diligence Stories
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I would be interested to find out from your experience stories of when due diligence either failed or was fudged. Stories can be anonymized but I truly believe from failures one can learn the best.
My story to share is that in one of the companies I was in that was purchased by another, one year after the purchase the buyer discovered that the financial results were highly manipulated and that profitability was much lower. This affected greatly the integration and increased the redundancies created by the acquisition. In turn of course the buyer sued the seller which was another corporation and ended up being compensated for their losses. The acquisition was done using high level consultants and yet this still passed through.Hi, it is a good question. Only one example I can share is that DD was successful but acquisition was failed. During HRDD, we conducted a Background Screening of the target companie’s executive and found he/she is somehow related with antisocial activities. I think compliance and governance issues are getting critical these days.
A number of companies were recently acquired on inflated valuation as due diligence failed to recognize and normalize for non-recurring COVID related revenues.
The surprise was due to the general expectation that COVID would have a negative impact.
Yet due to supply chain issues, companies across the board increased their purchases to build inventory buffers creating a one-time spike in the revenue of their suppliers.
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