The Due Diligence Process in M&A Transactions

Due diligence involves a thorough investigation of the business’s inventory as well as financials and contracts as well as intellectual property. It also includes an examination of any outstanding legal issues that could affect the acquisition.

Due Diligence plays a vital role in any M&A deal as it assists investors in determining the real value of a business. Typically due diligence involves examining documents that are confidential and requires the signing of non-disclosure and non-compete agreements. These procedures must be completed in full to avoid any problems that could negatively affect the deal, or even result in it being cancelled.

Investors should also look for any concerns regarding intellectual property that could arise, such as patents as well as disputes and licensing. Additionally, they should examine the human component of the company and understand its culture, such as severance packages, golden parachutes and stock purchase options.

The $9 billion Theranos collapse is a stark reminder of the need to conduct thorough due diligence prior to investing. While many of the red flags were openly evident, it shouldn’t be an excuse to skip this process. Due diligence can be a tedious and time-consuming job that requires coordination between multiple stakeholders and the expertise of experts in a variety of areas. It is essential to establish the purpose of due diligence. This will allow you to determine the resources needed and how best to utilize them. In some instances you might need to engage outside experts, such as insurance agents, lawyers advisors, financial or tech experts.

Leave a Reply

Your email address will not be published. Required fields are marked *