Before companies sign a deal, commercial, financial and operational stakeholders should have an aligned view on a target’s growth potential; sustainability of cash flows; financial and operational resilience; and value drivers. Integrated diligence — a holistic view of a target’s risk profile — can be the springboard for accelerating value creation and avoiding blind spots, particularly as companies pursue targets outside their core sector. Without integrated due diligence, there can be unexpected cybersecurity and tech costs; delays in synergy attainment; extension of transition service agreements (TSAs); and culture clashes that can erode deal value.
“Integrated diligence does not have to mean more costs and more time. It means having the capabilities to pinpoint and assess the areas of biggest potential risk and return,” says Paul S. Pan, Principal, Ernst & Young, LLP.
There are two key questions every executive should be asking in M&A due diligence.
- How do we identify and execute on what drives increased enterprise value?
- What are the big risks to the transaction that I cannot get wrong?