6 Reasons M&A Deals Fail

Merging with, or acquiring, another entity is always going to be a risky venture no matter how extensive the negotiations and due diligence process are. As with any major purchase, issues may not be clear until after the fact, and a lot of things can happen once everything is already said and done that may end up destroying any potential value before it is even realized. Here are six common reasons that M&A deals fail:

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How to Perform Reverse Due Diligence

Due diligence is an inevitable facet of any merger or acquisition, and companies considering a sale must take a long, hard look at the business before propositioning any prospective buyers. The best way to ensure that there are no surprises during the future buyer’s due diligence investigation is by engaging in reverse due diligence, also known as sell-side due diligence. This is just a due diligence investigation that takes place and has far less at stake before the real due diligence process begins. Here are the top tips for performing reverse due diligence:

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What To Do When You Receive An Acquisition Offer From A Competitor

For businesses that succeed and become an intimidating presence to their competitors, there is a good chance that one of those competitors will seek an acquisition at some point. After all, if a company cannot compete with its main rival, then it is clearly a smart move to join them. But, it can be a bit jarring for a company’s leadership team when they find out that one or more of their market challengers are interested in pursuing a purchase of their entity. The initial thought may be that there is something untoward brewing, with an understandable gut reaction to run as far away from the situation as possible. Of course, there very well may be good intentions behind the interest and a perfectly reasonable offer coming down the pipeline, so company leaders need to think twice before completely balking at the prospect. Here are some tips on what to do when you receive an acquisition offer from a competitor:

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Hard Due Diligence & Soft Due Diligence: The Difference Between the Two

Due diligence is an inevitable part of the process when two or more companies are merging or one company intends to acquire another one. The investigation essentially involves a ton of information gathering and analysis, as those involved in the deal want to ensure that they completely understand where the other party stands with respect to a number of important matters. Even though there is a basic structure and purpose, not all due diligence investigations will proceed in the same manner or address the same issues. In fact, there has been a growing trend toward the inclusion of both hard due diligence and soft due diligence. For those not as familiar with this newer focus, here is a rundown on the two types:

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Insurance Due Diligence in Mergers and Acquisitions

Everyone who has participated in a merger or an acquisition (M&A) knows that the due diligence part of the deal is quite a process. There are innumerable information requests from a team of folks responsible for spending hours upon hours perusing important documents. As with many business transactions, there are a lot of risks inherent in joining up with another firm, as both sides are bound to bring along a bit of baggage. Thus, identifying those risks and determining whether and to what extent they can be mitigated is all part of the due diligence phase. One of many matters that must be examined relates to the target company’s liabilities and the insurance available to cover those. Here are key things to consider with respect to insurance due diligence:

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Intellectual Property Due Diligence in Mergers & Acquistions

With mergers and acquisitions (M&A), it is likely that an overarching due diligence investigation will be required to allow the parties to the transaction to gain a strong understanding of the other side’s financial, corporate, and legal standing. This is a particularly rigorous process when there are substantial assets or significant risks at stake. In addition, in some transactions, there may be additional types of due diligence investigations needed, often in conjunction with or alongside the main process. For certain industries, usually anything associated with technology, this will normally entail a review of one or both companies’ intellectual property (IP). After all, many M&A deals are based on the innovative and invaluable aspects of a company’s IP. Here is what a company will likely need to provide and/or review to conduct appropriate IP due diligence:

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The Most Vital Documents for Fundraising Due Diligence

Due diligence is a cumbersome albeit integral step for many business transactions. Although it is a lengthy and detailed ordeal, the process really boils down to sharing a ton of documents for others to scrutinize so that they have a solid understanding of what it is they are gaining from the deal. Some document requests may seem odd, but those in charge of the due diligence investigation have to review just about everything imaginable, as there are a lot of different things that have the potential to jeopardize a company. Here are the most vital documents for fundraising due diligence:

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More Useful Questions to Ask Before Due Diligence

Last month, we discussed some of the things that companies seeking to sell should think about before pulling the trigger on that decision. Now, that was just a short list of some big picture items to take into consideration. The truth is that no matter how much a company plans and prepares, it may never be fully ready for the intricacies of a due diligence investigation. Nonetheless, it would be completely foolish to enter due diligence without having first conducted your own due diligence. Here are some more questions to ponder before committing to taking the next steps:

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Useful Questions to Ask Before Due Diligence

A lot of the information that is currently available regarding due diligence relates to the actual investigation process and the type of information that prospective investors will request and review. However, for a company that is looking to sell, there is quite a bit that has to happen before it will even get to this point. It is never wise to try to embark on a sale of your company and subject yourselves to an external due diligence investigation without first engaging in a bit of internal due diligence. Here are some important questions to ask yourself about due diligence beforehand to avoid succumbing to a potentially disastrous situation:

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M&A Due Diligence Checklist for HR Managers

When a company is deciding whether to acquire another business, it looks at a number of things to make its determination. Obviously, the financials of the target company are the primary area of interest, but there are a lot of operational aspects of the business that the acquiring company will want to learn more about as well. This generally takes place during the due diligence investigation, and it includes an examination of the target company’s existing employment structures and policies, as well as the actual employees. The human resources department of the target company will play a key role in gathering and furnishing this information for review during the investigation. Here is a list of items that the acquiring company will likely request:

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