DD in Distress M&A

This topic contains 2 replies, has 3 voices, and was last updated by  Terry Koh 8 months, 1 week ago.

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    Poon Henry

    In a distressed M&A situation, mostly the seller companies are running out of cash, thus hours and days count to accelerate the whole M&A process. What you think the DD in this situation different?


    Comanpanies in distress often have to move quickly to ensure the cash flow to ensure a higher selling price. Here the potential buyer can actually make use of the situation as a prolonged DD will add pressure on the target and the price negotiations might change into a positive direction for the buyer.
    However, this is of course not very ethical and I would advise any potential buyer to move ahead with the DD as quickly as possible.
    The most important DD field in this case would be financial and commercial. First to see the cost structure and then to see the true commercial potential of the target.


    Terry Koh

    While time is crucial in such cases, due diligence is still necessary for the interest of the buyer. It does not mean that due diligence can be neglected just because of the rush of time. Ultimately, the interest and benefit lies within the buyer and responsibility to move the deal forward. Nonetheless, the buyer has to be ethical and not purposely drag on the deal just to negotiate for a better deal.

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