Due Diligence

Frank Vielba and Carol Vielba

Chapter 8 in Reducing the M&A Risks, 2006, pp 116-123 from Palgrave Macmillan

Abstract: Abstract Before a company decides to acquire or merge with another a process of ‘due diligence’ is undertaken. The term due diligence applies to the investigation and evaluation performed by the acquiring company into the company to be acquired. In this process, often carried out by M&A’s consultancy firms on behalf of the buyer, a general examination of the target company’s assets, liabilities and capabilities is undertaken. The objectives of the due diligence typically are: To identify points that have an impact on the value of the target company and therefore affect price and bid negotiations. To reduce the risk involved in a deal, for example, by obtaining warranties against legal claims. To understand the potential synergies between the companies and gauge whether or not these are achievable. From the IT perspective, the focus of the due diligence phase should be to gain an understanding as quickly as possible about the state of the target company IT systems infrastructure. The activities involved will be to do with understanding the integration difficulties and costs. The key deliverable from this phase is the due diligence report that represents a high level assessment of the challenges and opportunities ahead.

Keywords: Consultancy Firm; Target Firm; Potential Synergy; External Consultant; Target Company (search for similar items in EconPapers)
Date: 2006
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-51436-2_8

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DOI: 10.1057/9780230514362_8

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