Rising Due Diligence Costs: A Cause for Concern in M&A

Fund managers are raising concerns about escalating deal costs within the M&A landscape. These concerns persist even in familiar sectors and strategies where deal teams have collaborated with the same advisors on previous transactions.

Key Cost Drivers:

• Unscoped Work: Insufficient attention to defining the scope of due diligence work leads to wasted time and effort in uncovering essential information.
• Duplication of Efforts: Advisors may spend time addressing issues already identified or factored into the deal by the deal team.
• Last-Minute Risk Identification: Late-stage flagging of risks necessitates additional, expensive discussions to reach resolution.
• Communication Silos: Delays in sharing diligence risks across disciplines (financial/tax/commercial to legal) can necessitate revisions to deal documentation.
• Redundant Update Calls: Frequent update calls with multiple senior advisors (at high hourly rates) can quickly become cost-prohibitive without clear justification for the time spent.

Industry Insider Perspective:

Insights from retired law firm partners highlight the significant time and resources invested in crafting polished due diligence reports.

The Call to Action:

Addressing these cost concerns is a critical focus for streamlining the M&A process. Strategies to improve scoping,communication, and overall efficiency can empower deal teams to achieve significant cost savings in due diligence.

Your Thoughts?

What are your experiences with managing due diligence costs in M&A transactions? Share your insights and suggestions in the comments below! Let's explore strategies to optimize the due diligence process and deliver greater value for M&A teams.