Why comprehensive due diligence is essential to M&A transactions

Why comprehensive due diligence is essential to M&A transactions (Aidan Jones on flickr)

Firmex tell us why due diligence is essential to M&A transactions, and to mix it up a bit, they’ve given us a comprehensive infographic to show disasters we could all learn something from.

Getting a complete and the most accurate view of the financial, operational and cultural characteristics of an acquisition target isn’t easy. Some of the largest brands in the world sometimes get it wrong.

Last year, HP’s $11.1 billion acquisition of Autonomy made headlines. In November 2012, HP announced disappointing earnings, taking a $8.8 billion write-down due largely in part to alleged accounting “improprieties” at Autonomy. HP claims that certain people at Autonomy willfully misled investors to believe that Autonomy’s growth and sales were stronger than they actually were, and HP therefore overpaid. However, surprisingly HP failed to notice the errors for a year; errors which were clearly overlooked during the due diligence process.

But HP is not alone. Many well-known companies throughout history have made similar mistakes.

We’ve brought together a list of the Top 10 worst due diligence blunders to demonstrate what happens when the stakes are high and the due diligence process breaks down.

Top Due Diligence Disasters

[Via: Firmex: Virtual Data Rooms]

It’s clear due diligence should be high on the list of priorities for companies like HP. Luckily HP only lost $5BN compared to others such as AOL Time Warner losing $99BN… What do you think? Let us know by commenting below.

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