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Due Diligence pre-merger

Posted by Andrew Butt on 18/05/17 09:14

Merger and Acquisition (M&A) activity often starts well before the actual merger with a period of due diligence where the value of the acquisition is assessed.

For businesses in the building materials, food, pharmaceuticals and other sectors who buy and sell finished goods, the driver is often increased buying power, and the imperative for due diligence is to clearly understand the value that new buying power could achieve.

Carrying out that due diligence work demands extracts of purchase volumes from disparate systems, consolidation across different item codes and units of measure, and consolidation across supplier references and deals.  If that isn’t complex enough, deals struck by suppliers can be different in every case and, if the core systems are not good at recording the intricacies of each deal, the original (paper) contracts need to be analysed, summarised and consolidated.

Pulling together data from disparate systems and reconciling it with paper contracts can be a hugely time-consuming and very detailed task.  Yet it is a fundamental task for anyone considering a merger or acquisition where buying power is the key driver.

DealTrack facilitates this area of due diligence by providing a platform for consolidating information from disparate systems without impacting at all on those systems.  Data extracts together with copies of contract details can all be fed into DealTrack for further manipulation in order to arrive at a true picture of the potential buying power post merger.

The end result could be one of two outcomes:

  1. You discover information pre-acquisition that leads you to believe the purchase price should be reduced or the merger should be halted.
  2. You discover information pre-acquisition that justifies the purchase and proves the financial benefits for the merger / acquisition to go ahead.  The information also gives you goals to use post-merger, and you have a system in place ready to use immediately post-merger for all your procurement.

Either way, DealTrack is of benefit to businesses in the due diligence phase pre-merger where buying power is a key motivator for the acquisition / merger.

To find out more about how this works, please download our guide “Realising M&A synergies faster”.

Realising M&A Synergies Faster

Topics: Mergers & Aquisitions