Due Diligence: An M&A Value Creation Approach (Wiley Finance) by William J. Gole & Paul J. Hilger

Author:William J. Gole & Paul J. Hilger [Gole, William J.]
Language: eng
Format: mobi
ISBN: 9780470502792
Publisher: Wiley
Published: 2009-07-16T14:00:00+00:00

The alternative to this top-down type of review is a checklist or compliance approach that ascribes equal value to virtually all aspects of discovery. This approach results in reviewers adopting an administrative attitude and focusing on completeness and efficiency at the expense of effectiveness, often failing to penetrate past the initial layers of inquiry on issues of critical importance. This form of review can be seductive, especially to those not practiced in the diligence process, because it provides comfort in the knowledge that all items on the checklist were looked at and all steps on the due diligence program were addressed. The optimal result from this approach is the ability to provide negative assurance—that is, that nothing emerged that would cause the reviewer to recommend that the transaction not be pursued. Unfortunately, negative assurance is a necessary, but not sufficient, diligence finding. This may indicate that the company under review is a solid company, but it by no means validates that it is a good investment. Therefore, it is critically important that the review team adopt a top-down, objectives-driven approach, accompanied by an investor mentality that intensely focuses its attention on the strategically important aspects of the transaction.

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