What are the most overlooked areas of Due Diligence?

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  • #100654
    jay
    Participant

    Where do you think most organizations do not put enough time and effort in due diligence? How has this impacted the organization in a negative way?

    #101308
    Luke Sexton
    Participant

    In today’s world, IT is a critical part of any modern business, yet from my experience, the attention given to IT due diligence is still fairly minimal compared to financial DD, Commercial DD or operational DD.

    Yet, in my opinion, the following questions are critical to get accurate answers to in order to move forward with a potential merger or acquisition:

    – Does the IT organization contribute to the corporate value?
    – Are the business applications scalable, reliant and up to date?
    – Does the target operate a modern IT infrastructure platform free from any technology debt?
    – Is the target’s security organization state-of-the art with strong cyber capabilities?

    These are just some questions for which a negative answer (or not knowing the answer at all) could lead costly and unplanned expenses during the integration phase.

    #101415
    Jonathan Cohee
    Participant

    Great question! One area where organizations often fall short in due diligence is in assessing Human Resource / cultural compatibility. Cultural due diligence involves understanding the values, norms, and working styles of the target company and how they align with the acquiring organization. When this aspect is not given enough attention, it can lead to clashes in leadership styles, communication breakdowns, and difficulties in integrating teams and processes. These cultural mismatches can create a negative impact on employee morale, productivity, and overall organizational performance. Additionally, overlooking cultural due diligence can hinder post-acquisition integration efforts and result in a lack of synergy and collaboration between the two organizations. Therefore, placing more time and effort into cultural due diligence is crucial to ensure a smoother transition and maximize the potential benefits of the acquisition.

    #101708
    John Olmstead
    Participant

    Good question,
    One area that we see are agreements that may exist with government entities. We see the customer contracts, vendor contracts etc. Often the target will have agreements with the local governments etc regarding Right of way of other area, that we do not discover until well after close and it not only could effect valuation, but operations as well.

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