DD blind spots

This topic contains 4 replies, has 5 voices, and was last updated by  Brandon Kissinger 6 days, 4 hours ago.

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  • #112548

    Kent Anderson
    Participant

    One thing work life has taught me is that people return to what they are good at over and over. The inverse of this is people do not return to what they are not good at. M&A requires leaders to be good in many areas all at the same time. What are your thoughts on people’s personal strengths and weaknesses leading to blind spots during M&A?

    #112922

    I think that sometimes people get so caught up in making the deal happen, that they ignore red flags. They fall in love with a deal and want to see it through even if it the deal starts to turn south and the logic would suggest that you stop the deal. You have put so much time and effort into it you don’t want to let it die.

    #112932

    Eric Hubacheck
    Participant

    That’s a great point Nancee. Behavioural analysis plays an integral role because the longer something drags out, the more biased the person is to see it through and the less likely they are able to cut their losses. This provides a challenge for dynamic due diligence processes, vs. rigid ones. I think it is difficult to remain emotionally junattached throughout the process, especially through the HR DD phase and understanding who the employees are on the other side of the table. It is very wrong to believe you will get to know who they are in a few week period. I believe this is where many threats will present themselves and not appear until the PMI stage, but I don’t have the experience to actually back this up.

    #114376


    Participant

    For me one of the things that people usually underestimate is the culture of the company and/or countries. A clear example is the Daimler Benz and Chrysler merger. Though on the paper it looked fabulous the reality was different, and the difference was team, management way, processes,… company and country cultures were very different. This has happened to me in another level, and top managers usually thing that this is not a big problem that “we will find the way to make it happen” and finally the deal is a failure.

    #115036

    Brandon Kissinger
    Participant

    Its interesting to see culture clashing come up again and again in acquisitions but at the same time how can the success of certain private equity firms be explained over the long term.

    Is it really a culture clash or poor incentives for both the acquirer and acquiree?

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