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I struggle with this. As legal counsel, I think I’m pretty good at maintaining a balance between getting essential info and overworking a file. However, I see my colleagues in other functions asking rounds and rounds of questions and am curious whether others have been able to build a culture around balanced due diligence that is observed by all stakeholders.
I have witnessed an overly complicated DD process sour the seller relationship. One must be cautious in the assessment of the required DD and balance the process in relation to the value of the transaction and target size.
From my experience, it is based on how much data is provided in the ‘Sellers’ data room, this can make the process go more smoothly or where information is lacking, can be more detailed and long. Also the size and the complexity of the ‘Sellers’ environment can determine how much is too much. I usually perform a 30,000ft snapshot and work downward depending on the data and the information provided.
It is better to perform a thorough DD prior rather than spending money post close to address the concerns or isuses not discovered during DD. With my experience I have seen issues emerge during PMI which derail or delay the integrations of two orgs but if we do not conduct thorough DD, I can’t even imagine the drill we have to go through during post merger integration.
Better to spend on DD than to enter transactions that pose significant risks/have negative returns/complete mismatch in cultures. I think it is too risky to neglect the full DD processes just because of initial upfront costs such as salaries of members involved in DD process.
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