Effect of Minimal Due Diligence on Post-Merger Integration

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  • #58350
    Emily Reinhart
    Participant

    Recently, I have been working with a client that completed a lack-luster due diligence internally for an acquisition of a company more than 3x its size that it will merge with over the coming months. We were engaged for pre-close planning but had limited capacity to dig in deep to the targets business processes, since they were deemed proprietary until after closing by the parent company it was being carved out from. This resulted in our consulting team’s inability to provide good guidance for post-close merger integration especially because of a lack of any detailed reports from the due diligence phase and a lack of access to that information during pre-close planning. Additionally, the business leaders who handled the due diligence process are also company shareholders of the private stock who will profit from a successful deal and were generally very excited to acquire such a large company in a similar industry. Their excitement and interest likely resulted in overlooking red flags found during the due diligence process. We advised them to use outside counsel for due diligence for future acquisitions, but in the meantime are picking up the pieces in the post-close environment. Have others had clients go through something similar before? How did you creatively navigate through limited due diligence reports?

    #58537

    Emily,

    I would come in and create my own diligence checklist through which we will “re-create” and deploy a new 100-day plan. It may require investment and “rework,” but it must be done.

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