Red Flags

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  • #52197
    Michelle Diago
    Participant

    What are the biggest red flags you look for during due diligence? And when is a red flag a showstopper or just a challenge?

    #52212
    Peggie Chan
    Participant

    From a compliance stand point, we look for potential risks for the parent organizations, e.g., high risk contracts, partners, or geographies.

    #52287
    Nathan Taylor
    Participant

    Within the SME space, I look for key employee and customer concentration risk, quality of earnings, family entanglements (i.e., does the son or daughter of the seller work in a key function).

    #52668
    Kevin Deasy
    Participant

    I don’t think any red flag should ever be classified as a showstopper, except when it is clear and obvious misinformation. I believe red flags are additive. The biggest issue, in my opinion, is 1. not recognizing a red flag and being surprised later, and 2. not connecting the dots between different red flags.

    #52819
    Greg Jessup
    Participant

    Sometime the realization of outside influences, such as labor unions can stop the process. In fact, the only time I have seen us get deep into the process and stop was as a result of unresolved labor union issues.

    #52869
    Brian Brown
    Participant

    I think in DD the goal is to look for things that can go wrong and have a significant effect on the company. For example a lawsuit that could ruin the companies reputation – this would probably be a showstopper if you felt the lawsuit had merit. Some of the risks can be mitigated – for example if a certain business is not wanted , it could be sold prior to the M&A.

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