Protecting yourself: Due diligence in mergers and acquisitions

2002 ◽  
Vol 13 (2) ◽  
pp. 17
Author(s):  
A. Carr Conway ◽  
Robert W. Rouse
Keyword(s):  
Mergers And Acquisitions ◽  
Due Diligence

scholarly journals Due Diligence Driving the Success of Mergers and Acquisitions in Macedonia

2016 ◽  
Vol 6 (2) ◽  
pp. 1
Author(s):  
Dushica Stevchevska Srbinoska
Keyword(s):  
European Union ◽  
Mergers And Acquisitions ◽  
Due Diligence ◽  
The European Union ◽  
Public And Private ◽  
Republic Of Macedonia ◽  
Communications Industry ◽  
Potential Risks ◽  
The Republic ◽  
Set Up

The act of due diligence is of vital importance when considering the possibility to enter the Macedonian market through merger and/or acquisition transactions. In this paper, I discuss that due diligence helps reduce potential risks or even results with curtailing the transaction as most of the Letters of intent never come to life. Many Macedonian entities, both public and private, operate in an environment considerably different to the European Union economies, a fact that inspires many questions with potential investors, especially in those who come from the European Union. If proper preparation takes place, and the expectations and processes are duly taken into account, successful merger and/or acquisition can be conducted in the Republic of Macedonia in spite of facing numerous difficulties.  Finally, I discuss that several suggestions/factors can maximize the chances of success, demonstrated with the example of due diligence process set-up prior to the one.Vip merger that marked the Macedonian communications industry in 2015.

scholarly journals The Management of Tax Risks in Mergers and Acquisitions - The Importance of Tax Due Diligence

2021 ◽  
Author(s):  
Arnaldo Marques de Oliveira Neto
Keyword(s):  
Risk Management ◽  
Mergers And Acquisitions ◽  
Merger And Acquisition ◽  
Point Of View ◽  
Exploratory Research ◽  
Due Diligence ◽  
Good Corporate Governance ◽  
Governance Practices ◽  
Target Company ◽  
Acquisition Processes

The purpose of this chapter is to demonstrate the importance of tax risk management in mergers and acquisitions processes by conducting an investigative work called due diligence. To achieve this objective, bibliographic and documentary research was used, as part of exploratory research. In topic 1 it is evidenced that the complexity of tax systems around the world has demanded increasing attention from companies to avoid undesirable cash disbursements for payment of infringement notices arising from questioning by tax authorities related to improper procedures of companies when paying taxes. Additionally, it has required them to be diligent in identifying lawful tax planning alternatives to optimize the tax burden on their operations. In topic 2 the responsibility of company administrators in the management of tax risks is exposed. Topic 3 explains the importance of accounting, tax and legal due diligence in merger and acquisition processes. Finally, topic 4 analyzes the main aspects of due diligence in the tax area. In view of all the exposed in this chapter, it will remain clear to readers the importance of the tax due diligence of the target company, as a way to minimize risks in the decision-making process of the managers of the purchasing company that may compromise the success of the merger and acquisition operation, as well as not subjecting them to administrative and judicial suits, for non-compliance with their fiduciary duties of diligence and loyalty in relation to the company of which they are executives. Additionally, the study’s results suggest that companies—in compliance with the guidelines and limits set by the board—choose the appropriate and specific techniques of risk management, especially those related to minimization, immunization, and transferring these risks. The recommendations derive from the need to identify and manage tax risks, from the point of view of good corporate governance practices. This study may serve as a reference to companies in general, when studying, developing, and implementing recommendations for the identification and minimization of tax risks, as well as in the development of a work program that allows them to conduct due diligence work in target companies.

scholarly journals Challenges and Risks in the Due Diligence Process Answered with an Innovative Approach

2021 ◽  
Vol 2 (1) ◽  
pp. 51-66
Author(s):  
Christoph Müller
Keyword(s):  
Mergers And Acquisitions ◽  
Positive Impact ◽  
Due Diligence ◽  
Expert Interviews ◽  
Manufacturing Companies ◽  
Key Factors ◽  
The One ◽  
Qualitative Part ◽  
Strategic Controlling ◽  
Existing Data

In existing academic studies on the Due Diligence process, the different areas have been considered separately. This is time consuming and causes inefficiencies. The proposed approach to Due Diligence integrates these separate areas into one process. While every company’s success can be defined by a few key factors, these differ by industry. The goal of this analysis is to develop a basis for decision-making regarding Mergers and Acquisitions for small- and medium-sized manufacturing companies by generating a scorecard model that enables the potential acquirer to perform an overall analysis of the existing data as well as to generate an informed outlook for the future using a standardized and efficient approach that also has a positive impact on the success rate of mergers and acquisition transactions. The model is based on different research methods. First of all, a literature research was executed, to define the theoretical framework. There are two main areas, the Strategic Controlling on the one hand and M&A on the other hand. The theoretical findings are specified through expert interviews. The expert interviews are semi-standardized. There is a quantitative and a qualitative part. Based on the analysis, a concept for a leaner DD approach is developed. The article presents a sum up of the research. Doi: 10.28991/HIJ-2021-02-01-06 Full Text: PDF

scholarly journals Economies of Scope and Optimal Due Diligence in Corporate Acquisitions

2021 ◽  
Author(s):  
Jeffrey J. Reuer ◽  
Arkadiy V. Sakhartov
Keyword(s):  
Mergers And Acquisitions ◽  
Incomplete Information ◽  
Empirical Research ◽  
Optimal Allocation ◽  
Formal Model ◽  
Economies Of Scope ◽  
Due Diligence ◽  
Corporate Acquisitions ◽  
General Recognition ◽  
General Appeal

This study develops a theory of due diligence in corporate acquisitions. Using a formal model, the study situates due diligence in the context of economies of scope, which are often sought by acquiring organizations that have incomplete information about such economies. Relatedness, the key determinant of economies of scope, and ambiguity, the key determinant of incomplete information, are used to derive the optimal due diligence effort and the returns to an acquiring organization that result from that effort. The derived predictions qualify both the general appeal to extensive due diligence and the general recognition of the costliness of due diligence. These predictions can be tested in future empirical research on corporate acquisitions and may guide corporate acquirers on the optimal allocation of their due diligence efforts in the mergers and acquisitions market.

scholarly journals DUE DILIGENCE: O CRITÉRIO ÉTICO DA MAXIMIZAÇÃO DE RIQUEZAS DE RICHARD POSNER COLOCADO EM APLICAÇÃO EM OPERAÇÕES DE FUSÕES E AQUISIÇÕES

Percurso ◽  
2019 ◽  
Vol 1 (28) ◽  
pp. 116
Author(s):  
Sandro Mansur GIBRAN ◽  
Gabriel Jacobs de OLIVEIRA
Keyword(s):  
Mergers And Acquisitions ◽  
Present Article ◽  
Law And Economics ◽  
Economic Value ◽  
Ethical Standard ◽  
Due Diligence ◽  
Moral Standard ◽  
Wealth Maximization ◽  
Deductive Method ◽  
Final Agreement

RESUMO Este estudo procura estabelecer uma relação entre o critério moral da maximização de riquezas, de Richard Posner, com a realização de Pré-contratos de compra e venda de empresas que antecedem a consolidação de uma operação de fusão e aquisição de sociedade empresárias, em especial ao que se refere à realização de due diligences entre a a celebração de ditas avenças com a finalização do negócio jurídico. Com isto, a presente pesquisa está pautada na resposta para o seguinte questionamento: “De que forma é possível reconhecer a aplicação do critério da maximização de riquezas em operações de fusão e aquisição de sociedade empresárias?”, de modo a justificar juseconomicamente a celebração de avenças prévias à consolidação desta modalidade de contratação no âmbito do direito empresarial. O presente estudo é pautado no fundamento epistêmico do racionalismo, que ganha forma a partir do emprego do método dedutivo de análise, atingido através da leitura de livros, artigos científicos e da pesquisa documental, cumprindo esta última forma de pesquisa com a finalidade de aproximar o estudo com a realidade, muitas vezes abandonada em prol da pesquisa meramente teórica. O presente artigo foi construído a partir da seguinte estrutura: 1) Introdução; 2) A maximização de riquezas como critério ético; 3) Acordos preliminares em operações de fusões e aquisições de sociedade empresárias; 4) A prática da due diligence; 5) A aplicação do critério ético da maximização de riquezas à prática da du diligence; 6) Considerações finais. Ao final da investigação foi possível estabelecer que a critério ético da maximização de riquezas pode ser verificado a partir da análise das características e finalidades da prática da due diligence, na medida em que esta prática viabiliza tomar conhecimento sobre o real valor econômico de determinado negócio, de modo a impedir a realização de uma operação financeira em que uma das partes envolvidas acabe recebendo ou pagando valores que não lhe maximize a utilidade da fusão ou aquisição, evitando-se, assim, uma situação de ineficiência econômica, segundo o critério da maximização de riquezas de Posner. PALAVRAS-CHAVE: Maximização de Riquezas; Eficiência; Posner; Análise Econômica do Direito. ABSTRACTThis study seeks to establish a relationship between the moral standard of wealth maximizing, by Richard Posner and the execution of preliminar agreements on mergers and aquistion transactions as well as the performance of due diligences that takes place between tthe pre-contract and the final agreement. Thus, the present research aims to answer the following question: "In what way is it possible to recognize the application of the wealth maximization ethical standard in operations of merger and acquisition of companies?”, justifying legally and economically the celebration of agreements prior to the final agreements on this kind of contracts. The present study is based on the epistemic foundation of rationalism, based on deductive method of analysis, achieved through books, scientific articles and documental research. The present article was constructed with the following structure: 1) Introduction; 2) The wealth maximization as an ethical standard; 3) Preliminary agreements on mergers and acquisitions transactions; 4) The due diligence process; 5) The link between wealth maximization ethical standard and due diligence; 6) Final considerations. At the end of the investigation it was possible to establish that the ethical standard of wealth maximization can be verified from the analysis of the characteristics and purposes of the due diligence practice, insofar as this practice makes it possible to know about the real economic value of a given business, in order to prevent the execution of a financial transaction in which one of the parties involved ends up receiving or paying values that do not maximize the utility of the operation, avoiding a situation of economic inefficiency, according to the ethical standard of maximization proposed by Posner. KEYWORDS: Wealth Maximzation; Efficiency; Posner; Law and Economics.

scholarly journals CULTURAL DUE DILIGENCE IN M&A. IMPORTANCE OF SOFT RISKS FACTORS

10.26458/1724 ◽  
2017 ◽  
Vol 17 (2) ◽  
pp. 38-62 ◽  
Author(s):  
Iulian Warter ◽  
Liviu Warter
Keyword(s):  
Mergers And Acquisitions ◽  
Significant Rise ◽  
Current Understanding ◽  
Due Diligence ◽  
Corporate World ◽  
Cross Border ◽  
Coherent Image ◽  
Risks Factors

During the last decades, the corporate world has witnessed a significant rise in the number of cross border mergers and acquisitions (M&As).In cross border M&As, not only different corporate cultures collide, but also different professional and national cultures.The purpose of Cultural Due Diligence (CDD) is to get a coherent image of the intercultural challenges of the M&A in order to be aware of the intercultural risks and opportunities.This article aims to reveal the perception of managers involved in the pre-M&A stage on the soft risks factors that need to be investigated during CDD.This study proposes an appraisal of the most important intercultural issues that need to be considered in M&A.Our contribution to the intercultural aspects of M&A literature consists in improving the current understanding of Cultural Due Diligence content.

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