Ms. Jyotsna Arora
(Tradeindia Expert)
Correspondent/ Reporter (SME News)
SME News
New Delhi, India
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TOPIC : Due diligence must for every merger and acquisition: Michael Short
Today due diligence is a must for companies, big or SMEs, in every merger and acquisition. And when it comes to SMEs due diligence is all the more important. This was revealed by Mr Michael Short, MD, IntegraScreen Group, in a conference on 'Due Diligence for Global Business Partnerships' hosted jointly by Assocham and IntegraScreen Group in New Delhi recently.
"Due diligence is the process whereby an investing party investigates, analyses, and evaluates an intended major investment, transaction, takeover, or business partnership prior to committing capital to it. Due diligence can be termed as a risk aversion strategy aimed at checking if the information about the investment that is available is correct and complete," Short commented.
“Due diligence helps in knowing what you are getting into and what you are paying for. Neglecting due diligence exercise of the legal and financial affairs of a company and getting into partnership with it may result in a myriad of complex situation. Undertaking due diligence activities, this kind of risks can be narrowed down to the minimum.”
He further said that before acquiring, merging or entering into business contract with other company, a company should close all the loopholes making sure that it knows the track record, bankruptcy and litigation history, and even the employee code of ethics of the target company.
"It totally depended upon proper due diligence exercise whether a company will excel or not, whether or not it will face nasty surprises when involved in a business acquisition, sale or any kind of financing proposals," Mr Short added.
The conference deliberated on the importance of Due Diligence for the successful business partnership at the international level.
The welcome address was given by Mr P.K. Sandell, Chairman, Assocham (Expert Committee on Computers and Electronics) highlighting the fact that a company should give utmost importance to due diligence while choosing its business partner.
"It is just like choosing your life partner," he said stating that a company should thoroughly check all the financial, legal and commercial situation of an another company before jumping into a partnership with it.
Amongst others, Mrs. Kusum Singh, Assistant GM, EXIM Bank gave her financial perspective in regard to due diligence and Mr. Vikram Banerjee, Assocham committee gave his views on Legal Affairs. Both the speakers expressed their views on legal due diligence and how it can help a company to assess business proposals, identify possible legal problems, and thus taking better corporate decisions.
It was felt that in order to minimize the element of risk and enhance success rate, it has become imperative for business to adopt modern approaches to Due Diligence. Although the process of Due Diligence is time consuming, it is absolutely crucial for any and every merger and acquisition.
Do your homework now in order to minimize the problems that might appear down the road – one fact that all the speakers in the conference agreed.
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