Due Diligence is the term associated with merger and acquisitions, an analytical effort where Private Equity, Venture Capital, and other investment firms define the potential value creation opportunities and actual purchase price. There is no due diligence standard; there are as many formats and templates as there are investment firms. However the due diligence process assesses the following areas of a proposed acquisition candidate:
- Strategic Assessment. A higher level review of present and potential opportunities, competitive analysis, current organizational strengths and weaknesses, alignment of strategy and execution, and an evaluation of executive talent;
- Financial Assessment. A detailed assessment of the organizations P&L, balance, sheet, general ledger accounts, A/R and A/P status, and general financial health and well being;
- Legal Assessment. A review of current legal issues, liabilities, contractual obligations, active lawsuits for product liability, patent infringement, or any other legal issues that present future risks; and
- Operational Assessment. An analysis of current internal operations and opportunities for improvement in areas such as order fulfillment, manufacturing, supply chain management, new product development, sourcing and supplier management, and other general continuous improvement opportunities that create value.
The last area – Operational Assessment – is often the weakest link in the due diligence process. [Read more…] about The “Operations Excellence” Due Diligence: Unlocking New Hidden Value in Acquisitions (and in All Other Organizations)