Ignoring due diligence findings
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Dear Community,
I’m eager to know your opinion: Do you find that strategic buyers tend to overlook due diligence findings in M&A transactions more often than not? If so, what factors could contribute to this tendency?
A strategic buyer might choose to overlook certain issues if there is a concern that a competitor could acquire the target company, potentially strengthening a competitor’s position in the market. So you might take the risk to secure your position (eg preventing a foreign investor to enter your market)
I may not necessarily describe it as “overlooking” due diligence findings. It could be that a strategic buyer has assessed risks and is comfortable taking it on, for a variety of reasons. For example, a strategic buyer may well determine that the benefits arising from synergies outweigh potential (quantitative) risk. Another reason could be that a strategic buyer is aware of certain risks being the norm in a given industry or geography.
Anyway, in my experience working as external legal adviser and currently an internal deal counsel, I don’t think strategic buyers generally disregard due diligence findings. On the contrary, I find that they generally do a holistic assessment of risks and mitigating factors.
Strategic buyers may overlook due diligence findings, particularly when an acquisition aligns closely with their long-term vision. Factors such as expected synergies, competitive pressure, and emotional investment can influence decision-making. While these factors may accelerate deal timelines, they can also increase the risk of post-merger complications.
Depending on the size of the acquirer and the purpose of the acquisition (Strategic reasons) , acquirer may choose to put less emphasis on certain parts of the DD findings as they may adopt the processes of the main company after the acquisition. The main purpose could be due to the customer base, the licenses and not the talents of the company etc.
From my experience, strategic buyers are more thorough in due diligence than VC companies. Strategic buyers are normally more familiar with the target companies technology and they often develop post deal strategies such as site closure & consolidations within their own footprint to take advantage of scale.
I see that strategic buyers don’t really overlook things, although this might seem from the outside. They properly weigh the risks of what they do and do not take into account for their DD findings. These might be different than your own perspective.
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