Everything You Need to Know About Due Diligence Investigations in Mergers and Acquisitions

Auditing and investigating a potential investment opportunity is essential. It’s a part of every merger and acquisition, bringing up important details that may have remained concealed during the negotiation process. An Anderson private investigator has the skills, the professional network, and the experience to carry out due diligence and give you as a buyer complete assurance.

Due diligence before a merger and acquisition deal involves a couple of important steps. Completing all of the phases is a prerequisite for a successful transaction.

The Importance of Due Diligence

The failure rate for mergers and acquisitions varies between 70 and 90 percent, Harvard Business Review reports. Insufficient due diligence is often one of the reasons why so many transactions don’t go through.

Not having enough information can fuel false beliefs, which eventually leads to the deal being abandoned as additional details get uncovered.

Due diligence is important both from a buyer’s and from a seller’s perspective.

A buyer will feel more comfortable with the quality and appropriateness of the investment they’re making. Expectations will also be realistic, meaning no entity will end up being disappointed because of unreasonable or unfounded beliefs.

Due diligence can also benefit the seller because it can provide very specific information about a company’s fair market value. A seller who’s been unaware of such information may have ended up agreeing to a deal that’s not in their best interest.

private investigators can help businesses evaluate potential partners

What Does the M&A Due Diligence Process Look Like?

An Anderson private investigator can assist the due diligence process every step of the way because of its specific components. Here’s a brief M&A due diligence checklist:

  • Financials: This part involves the examination of financial statements, understanding whether these have been fully audited, the coming up with an adequate future forecast, and the calculation of current debt, taxes, etc. A buyer should ask for financial reports, 401(K) balance documents, accounts receivable, current liabilities, contingent liabilities, etc.
  • Legal due diligence: What’s the company’s current legal status? Does it have any contractual ties and obligations? Is it facing regulatory issues? Are there any pending legal liabilities? These are some of the most important questions that have to be answered through legal due diligence.
  • Company overview: It’s important to find out why the company’s being sold, whether M&A attempts have occurred and failed in the past, what business plans for the future the brand has, whether any future expansion has been initiated, etc.
  • Technology and intellectual property due diligence: During the due diligence process, the buyer should be provided with enough information about technology employed, any proprietary solutions being utilized by the company, as well as about intellectual property. There should be clear information about patents, trademarks, trade secrets, and copyrighted products. 
  • Additional types of due diligence: Some other essentials to uncover during the due diligence process include:
    • Whether the company is a good strategic match to the buyer’s corporate profile
    • Sales and customer data
    • Managerial and employee information
    • Insurance and taxation details
    • Property ownership
    • IT capacity data
    • Environmental issues (especially important for companies that have to meet environmental requirements, those dealing with hazardous materials, those in need of environmental operational permits)
    • Marketing strategies

Due diligence can involve some industry or brand-specific steps that expand beyond what’s already been covered. For example, if a company uses very specific and rare materials, it should probably have a long-term, iron-clad supply contract to give the buyer peace of mind about uninterrupted production.

How Can a PI Help with Merger and Acquisition Due Diligence? 

South Carolina private investigators who specialize in corporate matters can play a major role during the due diligence process.

Private investigators can complete an array of important processes that reveal vital information about the deal. They have the knowledge and the authority to carry out:

  • Background checks
  • Searches on account balances
  • Review of public and private records
  • Analysis of the information that’s already been collected
  • Credibility assessment (through interviews, research, monitoring)
  • Risk assessment, especially in terms of conflict of interest

An Anderson private investigator will know how to complete these steps ethically and within the legal framework, while also giving their clients more than enough data to base a decision upon.

If you are in the process of negotiating a merger and acquisition deal, contact us and let us know what types of due diligence you’d need. Schedule your free consultation with a renowned Anderson private investigator by calling 864-671-4040 now.



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