A Clean (Team) Start On Merger Integration
The Clean Team: An Emerging Tool For M&A Success
By: John Koob Mercer Human Resource Consulting, Atlanta, GA
WorldatWork Journal - Vol. 15, No. 3, Pgs. 24-31
New tool for speedier integration. With M&A activity on the upswing, dealmakers are under increasing pressure to integrate the two companies as quickly and smoothly as possible. Good integration planning can spell the difference between a merger's success or failure.
To address the integration issues likely to arise after a merger, progressive companies field a clean team. (The name, explains HR consultant John Koob, comes from the computer and health sciences label for a designated work environment that is sealed off to prevent contamination.) The members collect, review, and assess confidential data after regulatory filing and before deal closing, a downtime that can span several months.
Unlike the due diligence process, which focuses mainly on the acquiror gathering financial information, the clean team is a collaborative effort focused on integration planning. Teams generally contain current or former employees and third-party experts such as accountants, consultants, or actuaries.
How to clean up dirty problems. Identifying key issues that are likely to emerge and recommending possible courses of action, clean teams give dealmakers a jump on stumbling blocks (e.g., differences in corporate culture or incompatible compensation and benefit plans) that often thwart or slow down successful integration. Doing so can shorten the time and enhance the quality of integration planning, while avoiding the problems associated with delayed rationalization of compensation and retirement plans.
The team's contribution to the new organization can translate into savings of several hundred million dollars, the author notes.
Two large industry leaders used a clean team when they formed a joint venture in 2004, creating the world's second largest producer of a particular product. They contracted with a consulting team to evaluate and analyze the venture's HR aspects. To avoid violating blackout and antitrust regulations, the independent consultants gathered information from the employees of the respective companies but did not disclose one company's information to the other. By implementing the resulting recommendations, the joint venture had decisions in place soon after its official launch, covering benefits, retirement plan design, a new payroll system, and an early retirement program. Other clean teams have identified cultural differences between companies, determined how those differences would affect the integration process, and made plans to accommodate them.
Guidelines for setting up a team.
The author provides guidelines for establishing and operating a successful clean team. For example, have the team leaders report directly to a steering committee of HR and other executive leaders from both entities. Follow clear, structured guidelines that conform with antitrust legislation. Keep sensitive information confidential; provide reports in an aggregated, anonymous format; restrict access to key information to certain personnel; provide complete documentation; and maintain all data and documents from both parties in distinct libraries. Restrict the target's personnel from seeing confidential information about the acquiror's operations or business.
Wednesday, May 14, 2008
Article List on Integration
Article by accenture team
http://www.accenture.com/NR/rdonlyres/0BB9A876-CE12-4E91-872F-3FFD72F6E27E/0/postmerger_a4.pdf
Six sigma driven integration process
http://www.effectivemanagement.com/ASSETS/CF996DA97AA3475BA5DF1BA901C5E534/240302_postmerg.pdf
Tower Perrin article
http://www.towersperrin.com/tp/getwebcachedoc?webc=TILL/USA/2000/200009/2002050106.pdf
Article on Intelligent Clean Room concept of Accenture
http://www.emeraldinsight.com/Insight/ViewContentServlet?Filename=Published/EmeraldFullTextArticle/Articles/2880260307.html
Post merger IT integration - Cap Gemini Case Study
http://www.de.capgemini.com/m/de/cs/ss_Post-Merger_Integration.pdf
Cultural challenges - Transatlantic mergers
http://www.kultur-und-management.com/artikel1.pdf
IT integration blueprint
http://common.ziffdavisinternet.com/download/0/1575/0116_whiteboard_print.pdf
Very interesting paper that discusses research of various consultants on mergers with pure scientific studies
http://www.ftc.gov/be/rt/businesreviewpaper.pdf
100-day plan - presentation
http://www.case-study.ru/files/6.pdf
Two merger integtation imperatives
http://www.atkearney.com/shared_res/pdf/strat_and_leadership_S.pdf
DNA of Effective post merger integration
http://www.promethee.asso.fr/Globa%20RWelborn.pdf
http://www.accenture.com/NR/rdonlyres/0BB9A876-CE12-4E91-872F-3FFD72F6E27E/0/postmerger_a4.pdf
Six sigma driven integration process
http://www.effectivemanagement.com/ASSETS/CF996DA97AA3475BA5DF1BA901C5E534/240302_postmerg.pdf
Tower Perrin article
http://www.towersperrin.com/tp/getwebcachedoc?webc=TILL/USA/2000/200009/2002050106.pdf
Article on Intelligent Clean Room concept of Accenture
http://www.emeraldinsight.com/Insight/ViewContentServlet?Filename=Published/EmeraldFullTextArticle/Articles/2880260307.html
Post merger IT integration - Cap Gemini Case Study
http://www.de.capgemini.com/m/de/cs/ss_Post-Merger_Integration.pdf
Cultural challenges - Transatlantic mergers
http://www.kultur-und-management.com/artikel1.pdf
IT integration blueprint
http://common.ziffdavisinternet.com/download/0/1575/0116_whiteboard_print.pdf
Very interesting paper that discusses research of various consultants on mergers with pure scientific studies
http://www.ftc.gov/be/rt/businesreviewpaper.pdf
100-day plan - presentation
http://www.case-study.ru/files/6.pdf
Two merger integtation imperatives
http://www.atkearney.com/shared_res/pdf/strat_and_leadership_S.pdf
DNA of Effective post merger integration
http://www.promethee.asso.fr/Globa%20RWelborn.pdf
Integration - I
The key to driving long-term stakeholder value is efficient, strategic and well-paced integration.
Avoid the common pitfalls of post-merger integration
Customer retention and the alignment of organizational responsibilities are important issues.
The key to a profitable merger hinges on the successful integration of two organizations, each with its own culture, processes and operating structures. All of these disparate elements simply cannot be consolidated overnight.
Long before the deal goes through, they should start developing a detailed action plan — one that recognizes that much of the real work begins only after the deal closes.
Develop an effective plan for the integration process
A smooth integration depends on identifying, prioritizing and measuring synergies early in the process. The integration planning should start well before the transaction closes. For instance, in addition to addressing financial, legal and operating issues, due diligence should be used to prepare for integration by examining issues such as cultural fit and shared organizational values.
Companies eager to hit the ground running on Day 1 will want to develop an integration plan that encompasses the following:
Establishing a project management office to provide guidance and tools, and to drive the integration process
Assigning a dedicated team, backed by executive support, to manage the integration program
Creating a tracking mechanism to measure how well they are capturing identified synergies
Planning for workforce integration and creating a retention strategy for key personnel
Implementing a communications plan to respond to concerns and provide quick answers to questions regarding people's ongoing roles and responsibilities
Addressing customer and supplier retention issues
Establishing a plan for addressing potential cultural differences
Developing a tactical plan for the first 100 days of the new entity's operations
By devising a comprehensive integration plan at the outset, and by implementing its various elements at a managed pace, companies can enhance their chances of structuring M&A deals that deliver long-term shareholder value.
http://www.deloitte.com/dtt/article/0,1002,cid%253D148623,00.html?theme=maen
Avoid the common pitfalls of post-merger integration
Customer retention and the alignment of organizational responsibilities are important issues.
The key to a profitable merger hinges on the successful integration of two organizations, each with its own culture, processes and operating structures. All of these disparate elements simply cannot be consolidated overnight.
Long before the deal goes through, they should start developing a detailed action plan — one that recognizes that much of the real work begins only after the deal closes.
Develop an effective plan for the integration process
A smooth integration depends on identifying, prioritizing and measuring synergies early in the process. The integration planning should start well before the transaction closes. For instance, in addition to addressing financial, legal and operating issues, due diligence should be used to prepare for integration by examining issues such as cultural fit and shared organizational values.
Companies eager to hit the ground running on Day 1 will want to develop an integration plan that encompasses the following:
Establishing a project management office to provide guidance and tools, and to drive the integration process
Assigning a dedicated team, backed by executive support, to manage the integration program
Creating a tracking mechanism to measure how well they are capturing identified synergies
Planning for workforce integration and creating a retention strategy for key personnel
Implementing a communications plan to respond to concerns and provide quick answers to questions regarding people's ongoing roles and responsibilities
Addressing customer and supplier retention issues
Establishing a plan for addressing potential cultural differences
Developing a tactical plan for the first 100 days of the new entity's operations
By devising a comprehensive integration plan at the outset, and by implementing its various elements at a managed pace, companies can enhance their chances of structuring M&A deals that deliver long-term shareholder value.
http://www.deloitte.com/dtt/article/0,1002,cid%253D148623,00.html?theme=maen
Tuesday, May 13, 2008
Due Diligence - Imperatives
For years, due diligence has been viewed as the tedious part of a merger or acquisition. A series of US accounting scandals and the recent pick-up in deal activity has forced investors to take this fact-checking process ever more seriously.
The importance of due diligence was clearly demonstrated in 2004 when the chairman of Smith & Wesson resigned following the disclosure that he spent 15 years in jail in the 1950s and 1960s for the part he played in a series of armed robberies. He apparently had not revealed his past when appointed to his executive post because "nobody asked". When the facts emerged, he departed.
An example from Control Risks Group's due-diligence division demonstrates the pitfalls that a thorough due diligence review can avoid. A major international investor was considering a substantial acquisition in the Czech Republic: the acquisition target had a strong profile and its management appeared to be western-oriented with a strong business plan and good development prospects. However, it was not a publicly-listed company and the information available was limited. In addition, the company's senior management had been associated with a major trading group that had recently been driven into bankruptcy through collusion by its shareholders and management. Control Risks Group conducted detailed due diligence into the target and discovered that the initial capital for the company had been embezzled by the general-director and founder from his previous employer.
Control Risks also uncovered evidence of 'tunnelling' between suppliers and customers controlled by the general-director. The advisory group consequently advised its client on how to structure the transaction to minimise their risks by replacing key personnel and introducing controls into the company as a prerequisite to the investment.
The private-equity firm CVC Capital Partners, was able to negotiate a lower price when it bought Kwik-Fit, the car-servicing business, from Ford in 2002 after accounting irregularities were found during the due-diligence process.
The basic purpose of due diligence is to confirm that everything at a company is as it appears to be in public. It is the predators' chance to examine their prey, warts and all. Without such a process, buyers cannot know whether a potential acquisition target is a poisoned chalice.
Typically, during a merger or acquisition process, the bidding company sends teams of advisers into the target company's specially-created 'data room'. A review will usually examine the financial, legal and operational condition of a business.
The length of time it takes depends on the complexity of the target company or the timetable of announcements. Depending on the size and complexity of the deal, costs can run into hundreds of thousands of pounds, but huge sums are spent every year on carrying out due-diligence exercises ahead of mergers or acquisitions.
According to Capcon, the UK's only quoted risk-management and corporate-investigations group, lawyers who study and verify contractual words, and accountants who audit the numbers, generate most of the costs of due diligence while little is spent on looking behind the contracts, profit-and-loss accounts and balance sheets, or on the key individuals and trading relationships.
Issues that are often overlooked include information on whether tenants of properties being acquired can walk away from their leases tomorrow, or under what circumstances a lender can suddenly call in its loans.
Without the answers to some of the key questions like the ones raised above, the company could turn out to be worth a whole lot less than a buyer pays for it.
When it comes to a hostile bid, due diligence becomes even more important as the bidder will only have access to basic public documents. The UK Takeover Panel's code gives a hostile bidder an equal opportunity to receive information that has been handed to a friendly purchaser. Alternatively, a bidder can launch an offer without due diligence but typically offers a lower price because it is 'buying blind' and needs to leave a margin to cover the risk of discovering the unknown.
Private buyers also do intensive due diligence before backing a management buy-out and any purchase of a private company comes without the comfort of reporting obligations that public companies observe.
Management due-diligence process
Focus on the capabilities of potential senior executives and non-executive directors has also intensified. According to Armstrong Craven, a European executive-research and business-information company, growing concerns about changes in corporate governance standards, the need for more transparency, and the recent pick-up in deal activity has led to management due diligence being taken more seriously.
Armstrong says the approach used to be ad-hoc, simply involving investment directors or advisers making a few calls to support their instinct that a management team was backable. Now, however, the management due-diligence process has evolved to become an integral part of the transaction process.
Among other exercises, the process now includes competency-based interviews to assess whether team members have the critical competencies necessary to deliver the aims of the business, psychometric personality profiles and professional referencing.
Cultural due diligence
Over the past few years, cultural due diligence has taken on a new importance. A cultural review can help determine what the target company's ethics are regarding its employees and shareholders and its ties with communities, as well as assessing the emotional and soft issues that a purchase will throw up. These issues can range from how employees are remunerated to whether they are allowed to dress down on Fridays.
Due diligence - Link to integration
Most value destruction in the mergers and acquisitions world is found in failed integration rather than poor deal execution. The process may provide valuable opportunities to get to know company personnel, their state of mind and level of motivation.
http://www.dofonline.co.uk/governance/the-importance-of-due-diligence.html
The importance of due diligence was clearly demonstrated in 2004 when the chairman of Smith & Wesson resigned following the disclosure that he spent 15 years in jail in the 1950s and 1960s for the part he played in a series of armed robberies. He apparently had not revealed his past when appointed to his executive post because "nobody asked". When the facts emerged, he departed.
An example from Control Risks Group's due-diligence division demonstrates the pitfalls that a thorough due diligence review can avoid. A major international investor was considering a substantial acquisition in the Czech Republic: the acquisition target had a strong profile and its management appeared to be western-oriented with a strong business plan and good development prospects. However, it was not a publicly-listed company and the information available was limited. In addition, the company's senior management had been associated with a major trading group that had recently been driven into bankruptcy through collusion by its shareholders and management. Control Risks Group conducted detailed due diligence into the target and discovered that the initial capital for the company had been embezzled by the general-director and founder from his previous employer.
Control Risks also uncovered evidence of 'tunnelling' between suppliers and customers controlled by the general-director. The advisory group consequently advised its client on how to structure the transaction to minimise their risks by replacing key personnel and introducing controls into the company as a prerequisite to the investment.
The private-equity firm CVC Capital Partners, was able to negotiate a lower price when it bought Kwik-Fit, the car-servicing business, from Ford in 2002 after accounting irregularities were found during the due-diligence process.
The basic purpose of due diligence is to confirm that everything at a company is as it appears to be in public. It is the predators' chance to examine their prey, warts and all. Without such a process, buyers cannot know whether a potential acquisition target is a poisoned chalice.
Typically, during a merger or acquisition process, the bidding company sends teams of advisers into the target company's specially-created 'data room'. A review will usually examine the financial, legal and operational condition of a business.
The length of time it takes depends on the complexity of the target company or the timetable of announcements. Depending on the size and complexity of the deal, costs can run into hundreds of thousands of pounds, but huge sums are spent every year on carrying out due-diligence exercises ahead of mergers or acquisitions.
According to Capcon, the UK's only quoted risk-management and corporate-investigations group, lawyers who study and verify contractual words, and accountants who audit the numbers, generate most of the costs of due diligence while little is spent on looking behind the contracts, profit-and-loss accounts and balance sheets, or on the key individuals and trading relationships.
Issues that are often overlooked include information on whether tenants of properties being acquired can walk away from their leases tomorrow, or under what circumstances a lender can suddenly call in its loans.
Without the answers to some of the key questions like the ones raised above, the company could turn out to be worth a whole lot less than a buyer pays for it.
When it comes to a hostile bid, due diligence becomes even more important as the bidder will only have access to basic public documents. The UK Takeover Panel's code gives a hostile bidder an equal opportunity to receive information that has been handed to a friendly purchaser. Alternatively, a bidder can launch an offer without due diligence but typically offers a lower price because it is 'buying blind' and needs to leave a margin to cover the risk of discovering the unknown.
Private buyers also do intensive due diligence before backing a management buy-out and any purchase of a private company comes without the comfort of reporting obligations that public companies observe.
Management due-diligence process
Focus on the capabilities of potential senior executives and non-executive directors has also intensified. According to Armstrong Craven, a European executive-research and business-information company, growing concerns about changes in corporate governance standards, the need for more transparency, and the recent pick-up in deal activity has led to management due diligence being taken more seriously.
Armstrong says the approach used to be ad-hoc, simply involving investment directors or advisers making a few calls to support their instinct that a management team was backable. Now, however, the management due-diligence process has evolved to become an integral part of the transaction process.
Among other exercises, the process now includes competency-based interviews to assess whether team members have the critical competencies necessary to deliver the aims of the business, psychometric personality profiles and professional referencing.
Cultural due diligence
Over the past few years, cultural due diligence has taken on a new importance. A cultural review can help determine what the target company's ethics are regarding its employees and shareholders and its ties with communities, as well as assessing the emotional and soft issues that a purchase will throw up. These issues can range from how employees are remunerated to whether they are allowed to dress down on Fridays.
Due diligence - Link to integration
Most value destruction in the mergers and acquisitions world is found in failed integration rather than poor deal execution. The process may provide valuable opportunities to get to know company personnel, their state of mind and level of motivation.
http://www.dofonline.co.uk/governance/the-importance-of-due-diligence.html
Human Due Diligence in Hostile Takeovers
In Hostile Territory
The rhetoric of hostile negotiations as it plays out in public seems designed to amplify cultural differences between two companies. From the target pours the language of resistance, decrying the poor fit and often questioning the motives and track record of the acquirer, sometimes in highly personal terms. For its part, the acquirer blasts away at the performance of the target’s management team, usually casting it in the worst possible light. Hostile acquirers that win the day often end up alienating at least part of the organization they are taking over, creating cultural terrorists in the process who do everything in their power to resist integration.
In this environment, it’s clearly impossible to employ most of the analytic tools we describe in this article ahead of time. Executive teams can’t spend time together, except in highly charged circumstances with lawyers on hand. Acquirers can’t expect to see inside data on questions of employee satisfaction, compensation and promotion processes, or decision-making norms. But companies cannot afford to ignore human due diligence just because the target won’t cooperate. Although hostile bids are rare, they also tend to be large. Hostile deals accounted for about 1% of all deals announced in 2006, for instance, but they accounted for 17% of deal value during the same period. Last year, the 374 uninvited bids made by corporate and private-equity buyers added up to offers worth $700 billion. What’s more, such deals often turn out to be game-changing for the companies involved and their industries.
Fortunately, there is a certain amount you can do in a hostile situation in advance. You can analyze published reports and news stories about your target. Senior executives who have moved on from the target company can sometimes provide useful views of their former employer’s culture. Customers and suppliers often have valuable insight into the decision-making processes and capabilities of the organization and may know how these compare with those of the acquirer. Any progress you make with this kind of human due diligence will help to test your investment thesis, determine boundaries for pricing, and identify some of the hot-button issues for the target’s employees. It will also help keep you focused on life after the deal and the critical next steps you will need to take to improve it.
Don’t rest on your laurels once the deal is completed. On your first day as boss, launch an aggressive “get to know you” program. As you become acquainted with the people, focus especially on the next generation of leaders, usually two levels below the CEO. These managers have not fought the pitched defensive battles a hostile takeover generates and thus often see the opportunities that a business combination can provide. They will be your key allies as you move to overcome resistance and build support, because they are highly influential down the ranks of the organization. Decisions they make to stay or leave will have a significant ripple effect. You should follow up this program with employee surveys, interviews, and visits, all of which should be framed to protect your investment—the people you acquired.
Properly presented, human due diligence can be more than a learning exercise. It can be an important part of the healing process that needs to happen before your hostile acquisition can deliver the value you were so desperate to obtain.
For more read HBR article in April 2007
The rhetoric of hostile negotiations as it plays out in public seems designed to amplify cultural differences between two companies. From the target pours the language of resistance, decrying the poor fit and often questioning the motives and track record of the acquirer, sometimes in highly personal terms. For its part, the acquirer blasts away at the performance of the target’s management team, usually casting it in the worst possible light. Hostile acquirers that win the day often end up alienating at least part of the organization they are taking over, creating cultural terrorists in the process who do everything in their power to resist integration.
In this environment, it’s clearly impossible to employ most of the analytic tools we describe in this article ahead of time. Executive teams can’t spend time together, except in highly charged circumstances with lawyers on hand. Acquirers can’t expect to see inside data on questions of employee satisfaction, compensation and promotion processes, or decision-making norms. But companies cannot afford to ignore human due diligence just because the target won’t cooperate. Although hostile bids are rare, they also tend to be large. Hostile deals accounted for about 1% of all deals announced in 2006, for instance, but they accounted for 17% of deal value during the same period. Last year, the 374 uninvited bids made by corporate and private-equity buyers added up to offers worth $700 billion. What’s more, such deals often turn out to be game-changing for the companies involved and their industries.
Fortunately, there is a certain amount you can do in a hostile situation in advance. You can analyze published reports and news stories about your target. Senior executives who have moved on from the target company can sometimes provide useful views of their former employer’s culture. Customers and suppliers often have valuable insight into the decision-making processes and capabilities of the organization and may know how these compare with those of the acquirer. Any progress you make with this kind of human due diligence will help to test your investment thesis, determine boundaries for pricing, and identify some of the hot-button issues for the target’s employees. It will also help keep you focused on life after the deal and the critical next steps you will need to take to improve it.
Don’t rest on your laurels once the deal is completed. On your first day as boss, launch an aggressive “get to know you” program. As you become acquainted with the people, focus especially on the next generation of leaders, usually two levels below the CEO. These managers have not fought the pitched defensive battles a hostile takeover generates and thus often see the opportunities that a business combination can provide. They will be your key allies as you move to overcome resistance and build support, because they are highly influential down the ranks of the organization. Decisions they make to stay or leave will have a significant ripple effect. You should follow up this program with employee surveys, interviews, and visits, all of which should be framed to protect your investment—the people you acquired.
Properly presented, human due diligence can be more than a learning exercise. It can be an important part of the healing process that needs to happen before your hostile acquisition can deliver the value you were so desperate to obtain.
For more read HBR article in April 2007
Acquisition due diligence - KPMG view
Acquisition due diligence
Acquisition due diligence assesses the risks and opportunities of a proposed transaction. It helps to reduce the risk of post-transaction unpleasant surprises.
It’s vital that the results of any due diligence process are relevant to the transaction including:
valuation of the target and therefore the purchase price
sale and purchase agreement (e.g. accounting definitions, accounting and tax warranties and indemnities, etc)
integration plan (e.g. deal synergies).
There are a range of circumstances in which companies can benefit from externally provided acquisition due diligence.
Where any organisation is considering an acquisition, merger or joint venture.
Where the organisation or deal manager has limited experience in undertaking due diligence.
Where existing advisers face a conflict of interest, or are not well placed to undertake the necessary due diligence.
Where the required due diligence demands technical capabilities and commercial experience beyond the organisation’s internal resources.
How we can help
KPMG can provide acquisition due diligence covering financial considerations (e.g. the integrity of historic and forecast information), tax, commercial factors (e.g. customers, suppliers, markets, competitors), superannuation, IT and human resources.
Appraising available information about the target and the proposed merged entity to more objectively evaluate the merits of the deal and the valuation supporting the offer price.
Identifying issues likely to affect negotiations.
Helping to reduce the risks associated with the deal by identifying and quantifying risks and benefits (e.g. identifying suitable warranties and indemnities for inclusion in the sale and purchase agreement).
Why select us
Global quality and consistency
KPMG’s international accreditation program delivers consistent global quality to all our clients. In each of KPMG’s 40 accredited Transaction Services groups our people go through the same rigorous training and skills development process.
Industry knowledge
We concentrate our experience by market sectors worldwide. For example, our global Financial Services Transaction team works exclusively with our banking, insurance and financial investment clients.
Transaction success factors
We’re continually analysing and researching transactions to improve our understanding of what makes a deal successful. The insights gained in this way are built into our services.
Service and performance
Penetrating financial, commercial and industry analysis is vital in understanding and managing the risks inherent in any business transaction. It reveals the risks and opportunities that lie behind the figures, allowing clients to challenge deal assumptions.
We deploy a proprietary methodology that’s under constant development by KPMG’s global research and development team - resulting in clear, quality reports focused on the transaction issues critical to the deal.
http://www.kpmg.com.au/default.aspx?tabid=807
Acquisition due diligence assesses the risks and opportunities of a proposed transaction. It helps to reduce the risk of post-transaction unpleasant surprises.
It’s vital that the results of any due diligence process are relevant to the transaction including:
valuation of the target and therefore the purchase price
sale and purchase agreement (e.g. accounting definitions, accounting and tax warranties and indemnities, etc)
integration plan (e.g. deal synergies).
There are a range of circumstances in which companies can benefit from externally provided acquisition due diligence.
Where any organisation is considering an acquisition, merger or joint venture.
Where the organisation or deal manager has limited experience in undertaking due diligence.
Where existing advisers face a conflict of interest, or are not well placed to undertake the necessary due diligence.
Where the required due diligence demands technical capabilities and commercial experience beyond the organisation’s internal resources.
How we can help
KPMG can provide acquisition due diligence covering financial considerations (e.g. the integrity of historic and forecast information), tax, commercial factors (e.g. customers, suppliers, markets, competitors), superannuation, IT and human resources.
Appraising available information about the target and the proposed merged entity to more objectively evaluate the merits of the deal and the valuation supporting the offer price.
Identifying issues likely to affect negotiations.
Helping to reduce the risks associated with the deal by identifying and quantifying risks and benefits (e.g. identifying suitable warranties and indemnities for inclusion in the sale and purchase agreement).
Why select us
Global quality and consistency
KPMG’s international accreditation program delivers consistent global quality to all our clients. In each of KPMG’s 40 accredited Transaction Services groups our people go through the same rigorous training and skills development process.
Industry knowledge
We concentrate our experience by market sectors worldwide. For example, our global Financial Services Transaction team works exclusively with our banking, insurance and financial investment clients.
Transaction success factors
We’re continually analysing and researching transactions to improve our understanding of what makes a deal successful. The insights gained in this way are built into our services.
Service and performance
Penetrating financial, commercial and industry analysis is vital in understanding and managing the risks inherent in any business transaction. It reveals the risks and opportunities that lie behind the figures, allowing clients to challenge deal assumptions.
We deploy a proprietary methodology that’s under constant development by KPMG’s global research and development team - resulting in clear, quality reports focused on the transaction issues critical to the deal.
http://www.kpmg.com.au/default.aspx?tabid=807
Due Diligence
Due diligence all too often becomes an exercise in verifying the target's financial statements rather than conducting a fair analysis of the deal's strategic logic and the acquirer's ability to realize value from it. Seldom does the process lead managers to kill potential acquisitions, even when the deals are deeply flawed.
What can companies do to improve their due diligence?
In "When to Walk Away from a Deal," Harvard Business Review, Vol. 82, No. 4, April 2004, authors have taken a close look at twenty companies—both public and private—whose transactions have demonstrated high-quality due diligence, and calibrated the findings against their experiences in 2,000-odd deals that they have screened over the past ten years.
They have found that successful acquirers view due diligence as much more than an exercise in verifying data. While they go through the numbers deeply and thoroughly, they also put the broader, strategic rationale for their acquisitions under the microscope. They look at the business case in its entirety, probing for strengths and weaknesses and searching for unreliable assumptions and other flaws in the logic. They take a highly disciplined and objective approach to the process, and their senior executives pay close heed to the results of the investigations and analyses—to the extent that they are prepared to walk away from a deal, even in the very late stages of negotiations. For these companies, due diligence acts as a counterweight to the excitement that builds when managers begin to pursue a target.
All the successful acquirers were found to be consistent in their approach to due diligence. Although there were idiosyncrasies and differences in emphasis placed on their inquiries, all of them built their due diligence process as an investigation into four basic questions:
What are we really buying?
What is the target's stand-alone value?
Where are the synergies—and the skeletons?
What's our walk-away price?
What can companies do to improve their due diligence?
In "When to Walk Away from a Deal," Harvard Business Review, Vol. 82, No. 4, April 2004, authors have taken a close look at twenty companies—both public and private—whose transactions have demonstrated high-quality due diligence, and calibrated the findings against their experiences in 2,000-odd deals that they have screened over the past ten years.
They have found that successful acquirers view due diligence as much more than an exercise in verifying data. While they go through the numbers deeply and thoroughly, they also put the broader, strategic rationale for their acquisitions under the microscope. They look at the business case in its entirety, probing for strengths and weaknesses and searching for unreliable assumptions and other flaws in the logic. They take a highly disciplined and objective approach to the process, and their senior executives pay close heed to the results of the investigations and analyses—to the extent that they are prepared to walk away from a deal, even in the very late stages of negotiations. For these companies, due diligence acts as a counterweight to the excitement that builds when managers begin to pursue a target.
All the successful acquirers were found to be consistent in their approach to due diligence. Although there were idiosyncrasies and differences in emphasis placed on their inquiries, all of them built their due diligence process as an investigation into four basic questions:
What are we really buying?
What is the target's stand-alone value?
Where are the synergies—and the skeletons?
What's our walk-away price?
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