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In the United States, due diligence is usually regarded as a financial function.
In reality, the research that takes place prior to the acquisition of a firm should have a much wider base, and
it should include not only the acquired company, but the parent as well. The Stanton Group adds a dimension of
support that financial groups cannot provide. Typical questions we research as part of our due diligence research
include the following:
- Is the acquired company's inventory fairly valued and readily convertible to
cash?
- Can operations be economically improved to reduce the need for inventory and,
thus, free up working capital from current inventories?
- Is the acquisition technically capable of providing acceptable quality and customer
service to its markets?
- Are the acquisition's and the new parent's products truly compatible from production
and marketing standpoints?
- Is there potential for consolidation of the acquisition's products, either internally
or with the new parent?
- Are key personnel within the acquired organization really capable of running
it to the parent's specifications?
- What are the training needs of the new company to prepare it to accept the parent
company's culture?
- How compatible are the data systems of the acquisition and the new parent?
- Is the parent company capable of absorbing and managing the acquisition's volume,
technology, etc.?
Depending on the specific situation, any of these can be a make-or-break issue
for the new match. Moreover, most can be much more readily solved before a merger takes place than after.
Adding a Stanton Group professional to your merger team is good insurance.
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Critical Analysis