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Due diligence and planning during a merger or an acquisition

On Behalf of | Mar 15, 2022 | Business Law

Mergers and acquisitions often create improved businesses. The new enterprise may have a much stronger position in the marketplace than either of the two preexisting companies. Before closing a transaction, however, business owners could benefit from due diligence and proper planning.

Depending on the businesses involved, due diligence may cover a wide range of factors. A basic “look-ahead” review generally includes examining financial statements. Fast Company reports that failing to also review technological systems could lead to problems. Management may not meet objectives when the new company’s technologies do not support a combined business.

Planning for some basic technological due diligence

Each preexisting company has an established technological infrastructure. Reviewing basic technological building blocks could help reveal which parts will provide adequate support to the new enterprise’s operations and customers. Database and security systems may require revisions to prevent cyberattacks.

Mergers and acquisitions may involve changes affecting existing employees, and also require training or hiring new personnel. Systems administrators, for example, may need to learn how to manage a transition from two technologies into one. Software upgrades may require preparing a combined workforce to handle an expanded system.

Preparing a road map for new and combined operations

Entrepreneur.com notes that formulating an integration strategy is important to staying competitive. A plan could focus on the primary reasons for the merger or acquisition taking place. Keeping the primary consideration front and center could help keep management on track.

The new business may have new employees, services and product lines. A focus on human capital and training could reduce the risk of problems involving technology or servicing customers.

Technology and human capital could reflect two of the most vital factors in successful mergers and acquisitions. Identifying each operation’s strengths and capabilities could help uncover both untapped synergies and potential integration issues.