From the Blog

December 6, 2011

M&A Due Diligence

Written by: Kerry Wilson

When clients are acquiring a business, whether it be through a merger, asset purchase or stock acquisition, their due diligence process is the key to a successful transaction. Because such purchasers are often in the same business, or feel that they “know the business”, their due diligence is sometimes un-documented and un-structured, thus increasing the likelihood of overlooking problems that may significantly impact the value of their deal. One of our clients, James F. Grebey, a consultant whom I’ve worked closely with on a large transaction, has recently published an extremely detailed guide to the due diligence process entitled Operations Due Diligence: An M&A Guide for Investors and Business (2011). The book is available from Amazon here and Mr. Grebey’s website is at www.diligentconsulting.com.

Full of illustrative examples from the real world, the book is complete with checklists designed to uncover issues that might come back to bite a purchaser before or after the transaction is complete. It covers the more obvious issues such as personnel and employment practices, environmental issues, and contractual relationships with third-party vendors, in addition to often overlooked problems involving immigration status, software licensing, insurance, and confidentiality issues. Most importantly, Mr. Grebey shows the reader how to expeditiously investigate crucial operational issues regarding documentation of the seller’s service or manufacturing processes, and to identify individuals who may be more important to the purchaser than the tangible equipment they are buying.

In the end, however, this book may be even more valuable to business owners who are looking to sell. By understanding what a careful buyer may be looking for in advance, such sellers can hasten and streamline a transaction by addressing and correcting potential problems before they are “discovered” by a purchaser. Sellers can work on these problems at their own pace, without alerting employees to a potential sale, and without (which is sometimes the case) being held hostage by third-parties who understand that the seller now “needs” their cooperation.

Mr. Grebey has provided a valuable resource to the business community, one that can save both sellers and purchasers unnecessary attorneys’ fees.