Hi everyone!
Today’s blog is about due diligence in business valuation and Mergers/ Acquisitions. There isn’t a day that goes by without another announcement of a merger taking place. Amazon and Whole Foods, CVS and Aetna, General Mills and Blue Buffalo just to name a few. Of course, how can we forget ATT and Time Warner and the bidding war over Fox Assets by Disney and Comcast. We all know in the valuation field that there is very high probability that acquirers are overpaying for these acquisitions. In a Harvard Business Review article, it suggested that study after study puts the failure rate of mergers and acquisitions somewhere between 70% and 90%. While there are many reasons for these failures, one of the primary reasons is the overpaying for these acquisitions. Nevertheless, all the major law firms and accounting firms all utilize similar due diligence check sheets and valuation programs. Yet, has anyone developed an effective due diligence model that quantifies qualitative components as well? Since 70%-90% fail, maybe a quantification of non-financial aspects should be valued as well to have a complete picture and lessen the failure rate. Your thoughts? Until next time…….
