The AMA Handbook of Due Diligence

The AMA Handbook of Due Diligence

The AMA Handbook of Due Diligence

The AMA Handbook of Due Diligence

Synopsis

The AMA Handbook of Due Diligence is the most complete guide available on how to properly perform a due diligence investigation - and radically improve the success rate of a pending corporate merger or acquisition. The new edition of this long-trusted resource includes a CD-ROM packed with almost 400 customizable forms and templates for recording and analyzing every possible operational or financial activity at any organization.


Extensively revised and updated, the book reflects significant changes in the financial landscape such as the Sarbanes-Oxley Act. There are specialized sections on joint ventures, franchises, and outsourcing, as well as new legal memo and form requirements, including data room index, preliminary diligence memorandum, and the Hart-Scott-Rodino questionnaire. Thorough and easy touse, this essential resource will ensure that every "t" is crossed, every "i" dotted... and no mistakes left out on the table.

Excerpt

There is increasing importance being placed on the governance of publicly held corporations. Consequently, knowledge of the makeup of the board and the conduct of its activities is a paramount concern.

Form 6-01 provides for the listing of the members of the entity's Board of Directors, their age, years served as a director and their participation on the various board committees.

Form 6-02, when completed, will list the board members' current affiliations, and Form 6-03 their current positions in the entity's securities.

What to look for

Age and Years As Director

It is desirable to have a fairly uniform distribution of age and years of service as a director. If a large
percentage of the board is reaching, or will reach, retirement age within a short span of time, the
company will lose the benefit of their collective experience.

At the other end of the age and service spectrum, it is important to have several younger board
members who will bring in fresh ideas. They will also serve as representatives of their generation's
response to the entity's activities.

Board and Committee Membership

Government and investor pressures are greatly increasing the importance, and workload, of the
board of publicly owned companies. No longer will the board, or its committees, be a “rubber
stamp” for management proposals.

When appropriate, members of the due diligence team may wish to meet with the key committee
members in their areas of mutual expertise.

Other Affiliations

Government and investor pressures are also impacting the makeup of the boards of public compa
nies. the trends are to separate the Chairman and Chief Executive roles, and to have a majority of
outside directors. Consequently, the quality and experience of the outside directors will take on
increasing importance.

Security Ownership

The conventional wisdom is that directors who have a stake in a company will do a better job for
the shareholders at large.

A conflicting viewpoint is that a shareholder/director may not be as objective as a truly independ
ent director. Short term profitability may take preference over what are sometimes referred to as
“social responsibilities.”

Whichever side of the debate you are on, knowledge of the directors' security positions are of interest.

Director Intentions in An Acquisition Situation

There may not be a role for outside directors in the post-acquisition organization, in which case the
desires or intentions of a prior director become moot.

If the acquiror plans to maintain the entity as a separate unit, it may be advantageous to retain some
members of the entity's prior board. the acquiror may also invite one or more of the acquired enti
ty's board members to join its board.

In these latter cases, knowledge of the individual director's desires is important.

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