Due Diligence for Mergers & Acquisitions of Broker/Dealers
The purpose of due diligence is to improve the odds that the merger or acquisition will be successful. It is best defined as a time of intensive searching for facts, thorough analysis, and constant reevaluation. A number of questions need to be asked and answered. Does the company really fit? Is it really as attractive as it appears to be? Can we manage the company successfully and achieve the benefits we identified? Will the company’s managers support our objectives?
The facts are that the majority of acquisitions and mergers do not deliver value to the buyer or seller. A study1 by Harvard’s Michael Porter concluded that 58% of acquisitions were later divested due to under-performance. Another report2 noted that 70% do not deliver anticipated value.
Our experience has confirmed that failure to conduct adequate due diligence can make a firm vulnerable to substantial losses and liability in today’s fast-changing marketplace. Due diligence can also give our clients the confidence to complete a proposed transaction with sound knowledge of the authenticity and background of their new associates.
In most instances, the due diligence process does not uncover any smoking gun regarding “deal-breaking” facts, but rather raises issues that will allow the buyer to better assess the risk-return tradeoffs of the transaction. We will tell you where a company is going – not simply where it has been!
Our Due Diligence Service includes investigating:
- Business and personal histories
- Business and personal reputation
- A record and summary of all civil and criminal litigation in pertinent geographic locations where the company or the individual has done business or lives
- Outstanding judgments and liens
- Financial and operating history
- Technology analysis (hardware and software review)
- Asset identification
- Contact with industry sources
- Contact with regulatory agencies
1 Porter, M E, From Competitive Advantage to Corporate Strategy, Harvard Business Review, May/June 1987, pp 43-49
2 Jackson, T, Financial Times, p 29, June 29 1998