Skip to Main Content
Access your saved content
There are many factors influencing the success of a corporate merger or acquisition, but the quality of the due diligence is one of the most critical.
Accenture looks at how corporate acquirers can take advice from private equity on how to streamline the due diligence process, overcome challenges and determine whether they should proceed or not.
Performing good due diligence is challenging for even the most experienced serial acquirers. The time table is compressed and driven by the needs of the vendors rather than the needs of the bidders.
Key information is often made available late or not at all. And with a range of parallel due diligence work streams to manage, there is a logistical challenge as well. Why, then, do private equity firms go from one due diligence to another with an apparent grace that most corporations only dream of achieving?
In this article, we identify four distinct actions private equity firms take that can help corporations streamline the due diligence process, make due diligence more effective, and ultimately enable better M&A decision making.
Accenture has identified four distinct actions private equity firms can take to help corporations streamline the due diligence process and make it more effective:
Look forward as well as backward. Any private equity deal maker can testify that one of the key drivers of the bid for an asset is future growth and stability of cash flows, as they determine both the asset’s value and the appropriate degree of leverage.
Focus on the key value drivers. A deal’s ability to deliver future value will typically depend on a limited number of drivers, and the private equity approach to due diligence reflects this. Each due diligence work stream is given a clear set of value drivers and risks to assess, and only once there is clarity on the most important issues will the due diligence focus shift to the next set of issues.
Rigorously revisit the synergy case. Synergies are a primary area where corporate bidders have a leg up on private equity when competing for an asset. Because corporates have them while private equity firms don’t, all other things being equal, synergies can allow corporate acquirers to bid more money than private equity.
Consider the integration roadmap. A key to getting an accurate picture of what stand-alone improvements and synergies to expect, as well as their timing, is having a clear view of how the acquirer will integrate the target company. This can require creating a high-level integration road map designed to identify key milestones for each functional area across the targeted integration timeline.
With due diligence being one of the most critical drivers of M&A success, acquisition-minded corporations could benefit from taking steps to enhance the way they conduct due diligence to help ensure they get the most out of every deal.
By taking a page from private equity and adapting the four principles to their own due diligence activities, corporate acquirers can be better positioned to overcome the challenges inherent in the process and more efficiently, completely and accurately determine whether they should proceed with a deal and, if so, what they are willing to pay.
Dhruv Sarda leads the Accenture‘s Mergers & Acquisitions practice in the United Kingdom and Ireland. Sarda focuses on helping clients in the energy, consumer goods and financial services industries with cross-border M&A, specifically M&A target screening, commercial and operational due diligence and integration planning. He is based in London.
Markus Rimner leads the Accenture‘s Mergers & Acquisitions practice in the Nordics and also serves as the Global Resources industries M&A lead. Rimner focuses on helping corporate and private equity clients through the entire M&A cycle with emphasis on portfolio, acquisition and alliance strategies, carve-outs and divestitures, commercial and operational due diligence, and integration planning. He is based in Gothenburg.
October 23, 2013
Skip Footer Links