Diligence Checklists, Company Inconsistencies, and Post-Close Surprises

 

M&A from a Business Consultant's Point of View

In this episode, Kison interviews business consultant Joseph Feldman, who works with middle companies on acquisitions. 

He has a lot of experience in regards of diligence checklists, company inconsistencies, post-closing surprises, getting help from deal-savvy lawyers while closing deals.

"Be humble. Take it one step at a time. Don't be so ambitious that you're biting off more than you can chew and be prepared to under promise and over deliver."

Summary

For the last ten years, Joe Feldman has owned his consulting business Joseph Feldman Associates. 

He works with middle market companies on acquisitions to help businesses that don't have corporate development executive as part of their team.

Furthermore, his responsibilities include helping them develop and acquisition strategy, identifying potential targets and assisting them with closing transactions that are attractive to them.

Joe has published many papers on diligence surprises. 

The Importance of a Due Diligence Checklist

When asked about what he thinks is the best due diligence checklist, Feldman has explained why this can be a trick question.

Companies frequently ask about due diligence checklists and can rely too much on them. 

Although there are many resources online that can be very useful when it comes to legal or accounting questions, and even about environmental issues, he believes that even some of the most detailed checklists do not consider some of the surprises that might take place after a deal is closed.

"There are detailed ones online that have almost 500 bullet points with ideas of questions that might be asked as a part of the integration process, but none of these questions relate to a lot of the places surprises are most prominent. Those being related to organizational fit, culture, potential changes that might occur with customers and suppliers, so checklists can be useful as a starting point but they can also give you a false sense of security if the thought is "Well, all we have to do is complete the checklist" and then we're done and ready for closing."

When it comes to key employees such as executives, top sales people, and research scientists, it can be difficult to know their intentions after closing a transaction.

There are many inconsistencies that can come up between brand and employees. 

Joe shares a CEO’S experience with an incompatible front-line staff.

When the staff was dealing with customers, they were very quick to offer discounts and giveaways while expanding his company. And it ended up costing him a location because of cultural differences.

While some companies that are regularly looking for opportunities to expand, Feldman’s advice is not to get rose colored glasses while closing deals. 

While handling multi-growth strategies and entering new markets, success probabilities drop while handing numerous projects.

Handling Tension

Feldman’s business experience has trained him on handling tension with confidentiality, legals aspects of M&A and staff, and transparency with the operation team while breaking bad news such as headcount reduction.

As a way to try and anticipate how customers may react after an acquisition, Feldman encourages role playing activities that consist of playing out conversations that are going to take place after deal closes. 

He goes through the variety of conversations that can take place.

When asked about legal help with surprises, he reminds about the value of deal-savvy lawyers who can help identifying and distinguishing general deal terms. 

This is not the same when it comes to bankers. 

"Keep in mind that investment bankers get paid for deals closing."

Feldman gives incredible insight due to his vast experience on M&A, and he shares his knowledge on dealing with post-closing surprises, red flags while closing deals and the disappointments and risks of not having an integration plan. 

He shares an anecdote of a CEO leaving the company after a major payout and not joining the merger.

For more insights and details, listen to the full interview.

LINKS

Grant Thornton’s diligence checklist

By
Kison Patel

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