According to Bo Dietl, many corporations have solidified their future success through business acquisitions. Although these can lead to phenomenal success and boost market share, a business acquisition comes with certain financial risks. Due diligence is the process of investigating these risks to find out if acquiring a business entity is an intelligent decision.
These four tips will help companies improve their due diligence process:
- Know that due diligence tasks are never the same.
Every business merger is unique. As a result, each acquisition requires a critical evaluation of certain business processes, as well as specific market considerations. Before committing to a merger, companies must consider how the following factors could affect the investment:
- Distributor deals
- Product acquisitions
- Breaking into new markets
- Technology licensing
- Prioritize making business decisions over simply crunching data.
Insightful data should be the basis of any business decision; however, focusing exclusively on the numbers is one reason why due diligence fails. Instead, decision makers must extract the data and analyze it meaningfully to develop sound business logic.
- Thoroughly explore any uncertainties.
Due diligence involves weighing the risks of a certain business undertaking, such as mergers, staff interviews or new products. Many companies try to shortcut the research process, and this often leads to unforeseen consequences.
Due diligence must address any uncertainties about a particular decision. The more time companies spend evaluating different scenarios, the more likely it will be that the due diligence process will be successful.
- Enlist the help of professionals.
Effective due diligence requires specialist knowledge. This is particularly true if you are investigating a corporate merger or business acquisition.
You may need the help of accountants, HR experts, marketing specialists, product developers, tax experts and private investigators. For example, tax evasion is an issue that often goes unnoticed during the due diligence process, but a forensic accountant can help you identify this crime and avoid a costly mistake.