Daily, many business integration efforts are made globally with stakes and shares changing hands. New business frontiers are opened during this process of acquisition and takeover, hence the importance of international due diligence to enable buyers to have a foresight of the business environment they are launching into. Over the years, the neglect of global due diligence investigations have cost multinationals a lot and have led them into making bad investments . Many times, the business deals may look too good to be true and the urge to overrule protocols may arise, but it is wise to look before leaping into the closure of that deal.
WHAT IS INTERNATIONAL DUE DILIGENCE?
International due diligence is one of the most important processes of business integration. It encompasses all the investigation processes that take place in between merger and acquisition (M&A) process , including legal and financially related due diligence .The paramount reason for advocacy of strict compliance to these investigations is that they allow for risk assessments, scrutiny of financial books, legal framework and standing of company. It ensures that the full knowledge of the business health is laid bare before the buyer, to enable him make informed decisions. This process will probably elongate the negotiation process, a reason many companies decide to bypass it to their peril in the long run.
KEY DUE DILIGENCE ACTIVITIES
For a seamless transition of control or management of any institution , that will be devoid of regrets later it is wise that the buyers don’t rely wholly on the report from the selling partner as there are tendencies for them to conceal some pitfalls . Rather, they should beam their global due diligence investigation searchlight on
* Financial Matters : What does the target’s company financial statement in the last 3 years say? how long the audit of the company’s financial account was done, the company’s projections and realities at hand, the condition of assets and level of indebtedness. All these questions must be sufficiently answered during the investigations.
* Technology/Intellectual property: The expanse of the target’s company technology and intellectual property frontiers should be on the table during the M&A process with interest on, the patents being held by the company,what registered trademarks do they own and the third party technology licenses .
* Clients and Marketing: In a bid to avoid coming into the market blank, it is wise to identify who the biggest clients of the target company are. Cases of customer dissatisfaction or issues of identity that may arise after the M$A process which will hamper customer relationship must also be taken into consideration because the existing clients are the tripod on which the buyer will use to launch into the market.
*Legal Issues: All contracts, licenses and litigations pending in court must be discussed during the merger process to avoid investing into a sinking ship that have pitted itself against the law. Meeting with the company’s attorney and gleaning information from the Department of Justice will be helpful in this case. Also, with the anti-corruption stance of many countries, a history of financial impropriety must not be overlooked easily.
“Employee Issues: Will the employees be giving way after the merger for new hands or will they continue at their duty post? schedule of compensations, pensions, employee wage bill and benefits, labour dispute issues. These and more will be deliberated upon.
Surely, nobody can predict the future but having a grasp of history can give venturing into the future the bet chance of success .Global due diligence is the panacea to failed mergers and overvaluation of company assets. It’s role in promoting sanity in the business environment must not be underestimated. There are also companies that provide the due diligence service for a reasonable fee, so ignorance shouldn’t be an excuse.