The Future of Buy-Side Due Diligence

The Future of Buy-Side Due Diligence

The Buyer’s Solution to Better Transactions

Successful mergers or acquisitions depend on achieving synergy. Acquisitive companies spend more time and money on due diligence today, and pay closer attention to the specifics, to gain greater market share and achieve greater efficiency.  

Once a company issues a due diligence request list to its target organization, a number of challenges potentially arise if the target company does not have the resources or experience to effectively respond. This can slow the due diligence review–or worse, bring it to a grinding halt–which can be common with first-time sellers or smaller companies without extensive M&A experience and ready access to resources.

Maintaining a solid data room is an important step to being able to react quickly to opportunities and the best due diligence tools are easy to use and can securely manage large amounts of data and control access, allowing you to focus on the deal.  

So, you have the data, but what do you do with it?

The best due diligence is not only about gathering and organizing documents and data.  It requires getting that information into the hands of the right people, at the right time so the deal can progress.  It’s about ensuring the diligence tasks are completed in a timely manner and that questions and issues do not arise that risk derailing progress.

By combining controlled access to the relevant data with the relevant tasks required, MergerWare improves the efficiency and effectiveness of the due diligence process, leading to a better and more complete review of the target company. 

To be efficient, internal, and external teams of accountants, lawyers, executives, and other parties involved in the deal can review material simultaneously, progress can be monitored, and issues resolve quickly and collaboratively.

Due Diligence is demanding, does it also have to be confusing?

A thorough, structured due diligence is essential to not only understanding the big picture but for evaluating the hidden nuances of a deal. Some of the key factors a company should consider are:

Understand your risk resilience and priorities

  • Determine the clear (and honest) understanding of risk tolerance before entering into any acquisition.
  • Realize that uncovering every aspect during due diligence is not possible, so focus on the areas that are most important
  • Effective use of resources is a must. Dedicating too much time into insignificant issues might hamper the smooth progress of the deal.

Get Standardized

  • Focus on fundamentals, approach M&A strategically based on 5 key pillars – purpose, principles, processes, people & performance.
  • Prepare a thorough opportunity & risk assessment of the target company’s financials, personnel, and cultural compatibility
  • Investigate customer, contractual, legal, IP & financial obligations of the target company to assess liabilities
  • Focus on objective performance of the deal pursuing each task with defined metrics & keep a schedule of M&A ready far in advance
  • Furthermore, the potential gains that can be accrued through a deal can quickly be lost if they are not reaped in time, hence fast decision making & action on time is crucial for success

In addition, there are a few pitfalls organization can avoid, for example:

  1. Solely focusing on “Risks”
    • The conventional approach of the due-diligence team might only focus too much on looking for risks that might derail the deal that they often overlook the “bigger picture”. As a result, once the risks are identified, acquirers use them to beat down the proposal on price. While analyzing the accountability is important, this approach limits the mindset.
  2. Inquiring data “bit-by-bit”
  • This approach of repeatedly asking for data not only results in irritating the target but also it is an inadequate process for gathering information. Collecting documents fragmentary could overpass the key value of the acquisition and may frustrate the target at the exact time when it is crucial for both parties to assimilate. This may lead to missing the “soft” but important elements of the new company’s culture.
  1. Unnecessarily extending the due-diligence period
  • During the process of due diligence, it is essential to balance care with speed and time. Sometimes, it may be enticing to gather additional information, but often the information adds new real value and merely prolongs the process.  Having a pre-defined set of diligence tasks, allows companies to quickly arrive, fully informed, at the key point where a decision can be made and avoiding the potential loss of momentum, which could kill the deal.
  • The due-diligence process yields plenty of information and it is essential to have a standardized way to process all of it. Having a system for identifying, analyzing, and processing what is an absolute necessity.

Powerful Buy-Side Due Diligence Engine

The best due diligence engine is tightly integrated with role-based access control so you regulate who uploads, download, and views documents, along with an advanced alerts process that helps you keep track of document activity.

Reduce potential legal exposure and costs while capitalizing on opportunities by providing immediate, secure role-based access to essential data, anytime, anywhere in the world.

Load Data Once – Establish Control from The Outset

A unique characteristic of the M&A process is that executives need to share early-stage information and often use off the shelf, unsecure tools such as email, web-based storing and sharing platforms.  And then they do it again. And again.  While these services may be adequate for some types of information sharing, confidential financial and business information requires a higher-level of control and security.

Especially, as the deal process advances, the lack of early control over data can lead to challenges that may delay or even scupper otherwise good opportunities.  By organizing and controlling data early in the process, deal teams ensure a seamless, organized methodology, ensuring the right data is always only in the hands of the right people and available when needed.

Reduce Time, Minimize Risk

MergerWare expedites the due diligence process by facilitating the sharing of critical documents while minimizing exposure to issues that could negatively impact or kill the deal. 

Grant role-based access to unlimited users simultaneously, while keeping data separated and anonymous, and track activity to ensure progress is being made and to ensure actions and dependencies are understood and completed.

The Most Advanced Tools to Manage Deals – From Inception to Integration

Execute successful merger, acquisition, or other transaction with MergerWare’s global, end-to-end suite of services.

Get ready for the deal by facilitating secure sharing and collaboration, execute the deal by getting the right information into the hands of the right people by understanding their intent and manage the deal through record continuity and precise and accurate regulated disclosure.  Whether it’s due diligence, content management, document formatting, and printing, or conferencing facilities you need, MergerWare can help.

Achieve the most out of your deals.  To learn more, contact us at sales@mergerware.com

Author

Anukriti Srivastava

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