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Next Generation Due Diligence
by Charles Francis Bacon
This article was originally published in the Due Diligence and Risk Management Journal. A shorter version of this article, focused only on mergers and acquisitions, was published earlier in the M&A Advisor. This article is also published and republished in MONDAQ. This article was updated in 2006-2008.
It’s not just for M&A anymore. 50-year-old practices no longer meet the challenges of defining and running an organization. Due diligence methods must be revamped to serve in today’s fast-paced and perilous environment.
Introduction
Decisions are what modern business is all about. Without a good dynamic knowledge base that accommodates change and complication, decision-making is binary at best. On/off. Black/white. Good decision/ bad decision (replete with attendant risk and danger). If decisions were airplanes, many would choose not to fly.
? Dun & Bradstreet reports that a corporation fails every three minutes, a new business is formed every five minutes, a share ownership change happens every six minutes, and a company changes control every 15 minutes.
? A McKinsey study concluded approximately 60% of mergers fail financially.
? According to the US Small Business Administration, about one out of every ten small businesses fail each year.
? Financial Times studies show that 70% of acquisitions do not deliver intended value.
? Price Waterhouse Coopers says: “Real due diligence analyzes and validates all the financial, commercial, operational and strategic assumptions underpinning the decision. It looks at p ...