Why do we need due diligence in M&A transactions? And how should we use it - to best effect?
Warren Buffett was famously disparaging about the need for detailed due diligence. Yet it’s a fact that many deal makers have overlooked material which, properly understood, would undoubtedly have affected their appetite for the deal - or, at least, the terms on which they choose to execute.
Academic studies suggest that over 70% of M&A deals fail in some way. Diligence, or the lack thereof, can be the culprit - but other factors are at play also.
In 2021, deal-making remains frenetic, and yet there is less certainty than ever, as businesses deal with one shock after another, and struggle to rebuild or reinvent themselves. Trading history is of limited value.
For all these reasons, we need due diligence more than ever - not more due diligence, but smarter and better diligence, with the focus completely revised to reflect the new business environment. This Redcliffe Training event brings M&A practitioners up to date with every aspect of how best to engage with due diligence: how to conduct it, where to look and what to look for, and how to incorporate the findings into our transactions. It is a vital update on making sure we make wise and proper use of due diligence - to get our deal terms right.
Due diligence is, more than ever, central to transactions. If it were ever a box-ticking exercise, it certainly is not one now. In 2021, the past history of a business, whilst interesting to understand, is no key to its future prospects.
Even on a small to medium-sized transaction (£20million or so) due diligence costs can exceed £500,000. Buyers know they need due diligence, but do they know how to get best value for it? In 2021, buyers need to think afresh about where due diligence should focus, and the scope of the diligence services they need.
The main advisers - financial and legal - on transactions have a role to play too. The importance of directing the due diligence enquiries, and correctly interpreting the findings, goes to the heart of any deal. Good advice to the client will add value and help ensure a successful outcome. Reports need to focus on what matters.
For their part, many diligence providers have a high sense of commercial awareness. They welcome the chance to discuss key findings with their clients and are consistently trying to make their reports relevant and commercially focused, feeding directly to the value of a transaction.
The course is therefore designed to help clients and their advisers to understand how to approach the due diligence aspects of a transaction. It will give attendees a better understanding of what due diligence entails, how to engage with diligence providers, and how to manage the due diligence process. Starting with an explanation of due diligence itself, the course considers how due diligence is procured, tours the growing range of areas covered by due diligence, and concludes by explaining how the due diligence findings link in to other areas of a transaction.
There will be a strong emphasis on practical, real-world issues throughout, with key messages and learning points underpinned by examples from the trainer’s extensive experience.
The course is designed for anyone working in M&A, in particular those who may need to use due diligence in the course of their work.
We will cover:
- The origins and purpose of due diligence
- The ever-widening scope of diligence work
- Providers and delivery models
- Areas where due diligence may be called for
- How due diligence fits into a range of transaction processes
- The ways in which due diligence affects transaction outcomes
The intention is to develop understanding, awareness and sophistication on the part of due diligence buyers and users. For diligence providers, it will help them understand how their report fits into the overall transaction, which, for many, is a ‘black box’.