Strengthening Due Diligence in Cross Border M&A
Although the pace of global M&A slowed during the past two quarters, overall deal count is up in 2011.
During 2012, M&A activity is expected to increase as firms shop for bargains, the global economy edges toward recovery, and cross-border acquisitions by companies in China, India and Brazil continue to rise. Yet, for businesses in both developed and emerging markets there remains slim margin for error in doing deals, raising the bar on due diligence, particularly in crossborder M&A.
To help get transaction pricing right and enhance the likelihood that die combination will achieve its aims, effective due diligence calls for understanding and quantifying the spectrum of potential risks associated with the target company. That starts with assembling a multi-disciplinary team, keeping them informed and engaged, and project managing each element of the due diligence process, according to a panel of M&A experts who participated in a live video webcast - "Strengthening Cross-Border M&A Due Diligence"- presented by Zurich and hosted by Global Finance.
While composition of due diligence teams varies by the target company's industry, size, geographic footprint and other factors, team members typically come from multiple disciplines and functions. It's important to manage the process effectively - both vertically within specific disciplines and countries, and horizontally, to get people communicating outside of traditional silos, according to tihe panel. Buyers lacking a presence in countries where the target firm operates need outside advisors who know local regulations and business practices.
Despite the proliferation of international accounting standards, for businesses making acquisitions in emerging markets, accounting issues can be thorny. Additionally, challenges related to the integrity of financial data cannot be underestimated.
"How good are the numbers?" asked John Marra, partner, Transaction Services practice, PwC. …