Reply To: DD – Does it simply confirm a decision already made

#124075

Stephane Hetroy
Participant

I believe, the confirmation of a decision already taken, happens quite often and is close to the picture of the great external consulting work done to comfort the CEO or BoD on the already decided new vision to implement. Unfortunately, I do assume that when there are a lot of conflicts of interest and if a CEO / top shareholders want to close a deal they will do it anyway, even if the DD results strongly suggest stopping the deal. Ego, money, image, market pressure… are all factors sometimes pushing for the ‘crime’. Another potential aspect is the watering down of any negative points at each layer when going up the hierarchy (command chain) in a company. Then the decision is not yet made by the CEO or BoD but the end result would be accepting a project even if the DD was originally negative. This is similar to the situation during a war when everybody on the ground says “the situation is really bad we are suffering heavy losses or something wrong is happening.” Then the feedbacks going up the command chain becomes more and more neutral or even positive… ‘no more risks and only positive outome’. This can happen if external advisors are pressured to waterdown their DD findings which are deemed too negative for the deal (after you have a group effect and responsibility dilution).

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