Sometimes we can get blinders wanting to close a deal. “Closing” becomes the ultimate goal and we’re unable to see other opportunities that may arise in the DD process. Do you believe that part of the DD process should include an adversarial team dedicated to providing alternative investment ideas for the investor (same quality returns or better) or should the DD process remain focused on the target and nothing else?
DD should be independent of investment opportunities and focused on its scope to attain the objectives of this important phase. Critical decision will be taken based on the results of the DD and high cost might be incurred if a wrong decision is taken because of foggy results.
Sitting on the legal side of acquisitions, I see that often the commercial team is very excited about the prospect of acquisition and can rush DD and ignore or excuse red flags found in the due diligence process. I agree with Mohamed that the DD process should be singularly and objectively focused on the target but think that it is a good idea for there to be “devils advocates” in the decision-making process following the DD to highlight red flags and even benchmark against other investment opportunities. This could mitigate the “group think” that can happen during M&A.
Polycom in its past had a “Yes” and “No” team that would be established during the preliminary DD phase to help determine whether the further pursuit of a target would be warranted given the time and expense involved. Agree that once detailed DD activities begin, that those are focused on the target. However, the rationale of both the “Yes” and “No” teams during preliminary DD could provide the DD team with better or more specific questions to ask the target during the formal process.
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