Important, But Often Overlooked or Rushed Part of Every M&A Transaction
Due Diligence is boring. It is tedious to research, analyze, draft and unexciting to read a resulting report. But when conducted correctly, it reveals hidden dangers or risks, or even gems.
When I enter a target company space, I start by asking for items from my general analysis checklist. Since there are so many different operational aspects among businesses, the list is edited pretty much immediately, on day one. Understanding the operations of a business is a very important feature of your consultants. This means the IT due diligence really started with our client conference, even before the analysis of target company starts.
Next questions we ponder is if the target business aligns with the investment idea, philosophy or portfolio. If it does, we add value to the business by improving its fundamentals, operational efficiencies or fiscal obligations. If it does not, we can start to position it for its vertical property, integration into a new field of business, absorption of its proprietary assets, IP or methods, tax harvesting advantage, carve-out or a spin-off.
Today’s technology allows us to scale up or down, any operational aspect of business infrastructure. And, since the infrastructure costs are expressed in each revenue cycle, the results are measurable at each attempt.
Our recommendations are made based on experience, history or knowledge in technology space. Oftentimes, we hire more outside horizontal consultants to work under our umbrella, whom can offer an even more detailed look into uncommon questions a client may ask. For example, I understand the target’s technology as it may relate to a custom piece of hardware or software implement, but we may get a consultant from that sector to report to us on its software development life-cycle (SDLC,) and at what time frame this becomes a relevant issue for stakeholders.
Frequently used consultants that show quality of work, discretion, trustworthy expertise and on-time performance are oftentimes brought to work as in-house experts, expediting our projects. The other, more niche professionals – we do better when we maintain working relationship with experts in the field while they continually work in their respective sector of expertise. This allows us to have consultants with fresh, honed and updated skills.