Due Diligence During the M&A Process
One of the best things about a career in law is the opportunity to work with extremely gifted and experienced attorneys. I have had the great fortune to learn from many such individuals, but none have been as influential in my life over the years as George P. Shenas here in San Diego.
Although I left George’s firm in 2009 in order to pursue a start-up venture as co-founder, our relationship endured… so that I now have the pleasure of collaborating with him on occasion as co-counsel on certain corporate matters. We recently worked together on an M&A transaction which did not close, but that collaboration inspired me to post this three-part video series capturing an in-depth conversation we had on the importance of due diligence. I trust it will be of interest to any readers contemplating the sale of their company or the acquisition of another company.
For more informative videos that feature other guests, please visit GPS INC
- Marcus Klebe
Part 1 Information as Currency – Why a Seller Short-changes Due Diligence at its own Peril
George P. Shenas, Esq. hosts Marcus H. Klebe, Esq.
George asks Marcus about the importance of due diligence in M&A transactions, and Marcus begins by defining “due diligence” and then explaining how undertaking a systematic review of one’s own enterprise gives a seller leverage during subsequent negotiations. Marcus and George encourage the full and honest disclosure of facts, even unfavorable ones, as part of the process – the key is placing all facts in their proper context, and painting a comprehensive picture of the enterprise that will hold up under close scrutiny and yet secure the highest possible purchase price. Marcus emphasizes the need to maintain the buyer’s confidence throughout the due diligence process, because trust is an essential component to speedy and mutually-favorable negotiations. George and Marcus agree that any financial or other projections relayed by the seller at the outset of the M&A negotiations must be met, or preferably exceeded, during the weeks and months leading up to closing in order to avoid the risk of significant price erosion.