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Insight - Face the Facts.
(From Financial Director)
Byline: Peter Bartram.
Merger negotiations were going well. The acquiring company was carrying out its due diligence on the accounts. Everything was shaping up for final signature, except that due diligence on revenue streams, accountancy systems and stock levels had missed one rather material point - the CEO had criminal convictions for fraud.
The acquiring company discovered the information in time to abort the merger, but the incident reveals a key danger in due diligence exercises.
They might be missing facts about the directors or management team that have a significant bearing on whether to make the acquisition or not.
In many cases, the due diligence process fails to cover enough about the background of key personnel. CVs are treated as the gospel truth.
It doesn't make sense to Bob Dulieu, operations director of risk and investigation services plc Capcon Holdings. "When you're acquiring a business, more often than not it's the people you're acquiring who will be key to its success," says Dulieu. "It's important to take a closer look at the people, their background, reputation and any business issues from their past that may be relevant."
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