The world of M&A is full of complexities, but the due diligence (DD) process shouldn't be one of them. A recent discussion on LinkedIn revealed widespread frustration with current practices, highlighting ten key pain points.
To summarise, the top 10 key irritants seem to be:
1️. Crappy starting points: under-investment in the initial scoping and DD requests. Too many templates. Mindless repetition of requests across workstreams (see no. 9 below re siloing)
2️. Unstructured data: The underlying data made available for review is unhelpfully unstructured. Most target companies collect data in some form of structure (e.g., through CLMs / other software), so why is it so difficult to make that data available in a form that can easily be digested?
3️. Archaic reporting tools: The software used to manage and produce the DD outputs. In particular, reliance on the not-particularly-fit-for-purpose Word and Outlook
4️. Over reliance on those with the least experience: DD tends to be devolved to the most junior members within both the advisors’ teams and the deal team. Isn’t that in and of itself a risk?
5️. Too much cost, not enough value: Many are saying that DD is far too expensive and has become more of a choreographed box-checking exercise from people on autopilot, rather than a focus on delivering valuable, actionable insights (see numbers 1, 3, 4 and 6 – 9!)
6️. Timing is everything: Key findings shared in DD reports often come too late in the process. And then, after the DD reports have been issued, the data in those reports becomes quickly stale
7️. Too much data and not enough clarity: The DD outputs are voluminous and hard to digest. Key findings are often difficult to distinguish from the noise, understand in context and turn into meaningful actions
8️. Risk-management driving conservatism: Related to no. 7, a sense that there is too much focus on non-impactful findings with a suspicion that this is not helped by some prioritising the management of their own risk over providing impactful advice to the investment team
9️. Siloing of data: Not just individual DD workstreams not speaking to each other (despite the performance art of my favourite multi-advisor DD update calls…), but also that the integration teams are, ironically, not usually integrated into the process
1️0. Not learning from our mistakes: despite all of these shortcomings…what do we do on the next deals? Exactly the same thing again... ♻
Do you think there is anything missing?
