Company acquisition or mergers can provide a huge boost to the economy while at the same time creating new jobs and career paths. However, they can be risky if the proper due diligence is not undertaken which may cause financial instability. In order to follow the right process below, we have listed five things to consider when undergoing business due diligence.
1. Don’t just crunch the data
Data is very important when undergoing business due diligence and it can be easy to get fixated on the number rather than extracting and analysing the data which will lead to logical business decisions. Keep the data analysis simple and ensure that it will provide you with a clear answer as to whether you should proceed with the merger of acquisition. Your due diligence should have a specific goal and aim that will help make your decision an easier one.
2. Hire the right people
Business due diligence requires specialist knowledge and it is, therefore, important to have the right people and professionals working with you. Whether you are looking to sell or acquire an existing business and depending on the business decision you are making will demand a skill set that could range from marketing specialists to accountants or tax professionals. At The Stan Lee, we have a number of experts who can help with your business due diligence – from helping to get the precise decisions to getting leverage for valuation and negotiation.
3. Consider uncertainty
Due diligence is about weighing up the risk. The answer to whether you should move forward with a merger or acquisition lies with the uncertainty that the future holds. The time you spend undergoing your business due diligence will have a bearing on the future decisions, goals and return that your newly acquired business will face. Considering uncertainty is not a bad practice, and it is one that will ensure you make the right decision in the long run.
4. Look past the numbers
You’re in business to make money so it is understandable that the figures should add up. Numbers will help you make informed business decisions, deliver on your goals and market performance as well as hit a positive ROI. However, analysing the numbers is not the be-all and end-all when undergoing due diligence so it is important to look beyond them at other aspects of the business such as the experience levels of the staff and logistics.
5. Be ambitious but realistic
Large companies have the benefit of a CFO to handle all the due diligence and other financial matters, but CEOs also like to take a large part of the responsibility for making important business decisions. Given that their role is central to the business they need to find a balance between being ambitious and being realistic. It can be hard to see the woods for the trees if the business proposition is too good to be true.