- This topic has 13 replies, 14 voices, and was last updated 6 months ago by RongFang LYE.
February 13, 2022 at 6:01 pm #56214Osamah BukhariParticipant
The main logic behind due diligence activities is to bring the in-depth value. however there are many challenges comes with it such as
* Inadequate valuation
* Slowness of execution
* Unplanned costs
* Lack of expertise
* Sunk Costs
what are your thoughts on how to overcome these challenges? and what are other challenges you may have faced?February 15, 2022 at 5:02 pm #56279Roberto LandaParticipant
Organization Culture and rejection to change established practicesJuly 27, 2022 at 1:49 pm #62514Justin LauParticipant
Agree that unplanned costs is a key challenge.
Employees leaving after the M&A.August 4, 2022 at 7:08 am #63156Jon AbelParticipant
Agree with this – especially as it remains difficult to quantify these elements, as it involves so many unknowns. Plus at the moment, with travel difficult, it really hampers fully understanding a target’s culture.August 14, 2022 at 4:31 pm #65108Prince AgyarkoParticipant
In my opinion some common challenges in DD process are:
-Information asymmetry between buy-side and sell-side during the deal
-Longer duration to complete the DDs process.
-High costs involved in the DD process due to long duration period
-Communication problems between buy-side and sell-side
-Lack of accurate data to make effective decision making in the deal
-Lack of access to full data disclosure to reach decision making
-Sunk costs should the buy-side opts out of the M&A process during DD.September 11, 2022 at 6:49 am #68515Tobias SchallerParticipant
I would like to add a famous quote by Peter Drucker: Culture eats strategy for breakfast. As long as human capital is part of a deal, the buyer must ensure that culture perspective is handled with care, sensitivity and open but straight communication.September 12, 2022 at 2:45 am #68551Rajesh KumarParticipant
My views are that the entire DD process (which covers all the functional DDs) are extremely important in the M&A process and is of utmost strategic relevance and will also ensure sustenance of the “future” organisation if done properly. Else it could have serious ramifications.
The directive to ensure a deep dive and credible DD must come from the CEO/Top management and the apex committee must comprise of senior management to give this process its due.
There could be inhouse “lack of expertise” however this is not a serious concern as there are consultants having such expertise and available in the market.
The slowness of execution also depends on the eagerness of both buyer and seller and in order to avoid slowness, appropriate terms needs to be mentioned in the SPA.
Costs need to be budgetted as I personally feel that such costs can be easily cushioned in the synergies if done properly. I have handled 7 M&A’s globally and really do not find the unplanned costs as a matter of great concern unless such costs overtake your synergy numbers!September 25, 2022 at 2:57 pm #69288Anubhav GuptaParticipant
Be focused on what the key diligence items are depending on the kind of transaction and the logic for doing so – and then ruthlessly focus on those factors to be most efficient.October 3, 2022 at 2:38 am #69601Sarah MillerParticipant
Regarding the lack of expertise, I can relate. Smaller companies don’t necessarily have a lot of experience with due diligence or M&A overall which presents challenges and added time learning and likely re-inventing the wheel. I imagine larger companies have designated resources, but for smaller companies looking to be involved in the M&A space, are there designated resources you can hire? Or would the group recommend to have a designated person in house?
A challenge I have faced with this topic is management not involving HR in the due diligence process or at minimal levels. Everything else gets figured out after the fact which is definitely not optimal in my opinion.October 5, 2022 at 6:41 am #69710Waleed GhemlasParticipant
one of the common challeng is the qualtiy of provided data and information in the VDR as well as language barrier which will impact schedule.October 6, 2022 at 3:06 pm #69759Ashima AggarwalParticipant
For deals where an internal team is taking the lead on due diligence, I wonder if an iterative process with debriefs with the DD team and the seller giving candid feedback on their experience after each deal would be helpful. I think this is cultural but even with an organization, culture can vary across departments.October 7, 2022 at 6:29 pm #69890Ahmed Fawad MuslimParticipant
I think some organisations specially in Asian region, they want things done fast and don’t want to follow the international guidelines which are there for protecting the parties.November 27, 2022 at 4:09 pm #71545Joshua Tan Lien HoeParticipant
Lack of emphasis on culture of the targetDecember 7, 2022 at 6:36 am #72015RongFang LYEParticipant
I think it is also important to be empathy to the people involved as we are after all dealing with human and their livelihood.
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