The failure to conduct proper due diligence is one reason mergers fail. Mergers and acquisitions are not simply big words; they are big complex deals that involve extensive preparation, long negotiations and detailed contracts covering everything from executive control to third-party interactions. Having the right professionals on your side can literally make or break the deal.
Research varies from one source to another, but no matter who you get your information from anywhere from 50 to 85 percent of mergers fail. Success often comes down to the nitty-gritty details, according to some analysts. Some of the theories behind a failed merger include failed due diligence, momentum, debt and post-merger possibilities.
Due diligence is a part of every deal. In the broadest sense, the term means that there is a duty to investigate before making a deal or signing a contract. One problem with some mergers is that the “investigation” is not done properly whether that means that it was not thorough or that there was a problem with the person conducting it.
Momentum and debt can even play a role. Some people are afraid to say what they really think once a deal is underway. We talked above about how complex these deals can be; they are expensive as well. When a lot of money has already been spent, it can be difficult for some people not to want to keep the process moving.
Last on our list are post-merger possibilities — what is actually going to happen after the deal as well as the perception of what could happen. Fear of negative results can be a powerful emotion in a business deal. The right attorney will not only ensure that the details are taken care of, but that they are clearly communicated to those involved.
If you would like to learn more about why failure to conduct proper due diligence is one reason mergers fail we invite you to review the strong recommendations of our former clients and contact the Watkins Firm or call 858-535-1511 today for a free consultation with one of our experienced San Diego business attorneys.