Question

1. What are the purpose of the buyer and the seller performing due diligence? What other parties might want to perform due diligence on the target firm?

2. Describe the financing plan.  In what sense is it a “reality check?”

3. Of the various activities conducted during post-closing integration, which do you believe is the most important and why?

4. Identify the main challenges of developing a new organization for the combined businesses.  How would you attempt to resolve these challenges? Be specific.

5. What are the common methods for integrating corporate cultures?  Of these, which do you believe would be the most important? Explain your answer.

Answer 1

1. Due diligence is the performed by the buyers before entering into a contract with the supplier. It is also performed by the seller when the buyer has approached for the acquisition of the company. The main purpose of the due diligence is to check the company’s information and assets as per the criteria presented by the owner of the business. The buyer’s purpose is to know the serious shortcomings before the purchase of business. The seller’s purpose is to find the buyer who will be able to protect the legacy without false promises.

The other parties may involve creditors, investors, banks etc.

2. Financing plan involves gathering, understanding, implementation and the managing the financial resources to reduce the costs and maximise the profits. It involves planning to achieve the organizational goals.

Reality check is involved in each and every step of financial plan. The expenses are well planned as per the spending. The spending plan helps to keep a track on the expenses. Reality check is tracking the money thoroughly whenever there is inflow or outflow. The outflow should be as per the plan and must be compared with the planning figures. The deviation should be detected and the steps should be taken to reduce the deviation.

3. Post closing integration is the very important phase of the Merger and Acquisition process. The most crucial part is to implement the project as per the planning as the failure of implementation may lead to serious threat to the business operations and its success.

4. The various challenges and their resolution after mergers and acquisitions are:

• The coordination of different teams is hard but the clear specification of the roles in new company helps in better results.
• The detailed due diligence should be performed on the part of both the parties and the lack of due diligence may lead to losses to any of the party.
• There is possibility of high deviation in actual financial results and planned financial results. The detailed financial plan is required and reality checks to be performed timely to negate this.
• There may be legal issues due to lack of documentation part. The same can be overcome by hiring a lawyer to complete the formalities.

5. The various methods for merging the corporate culture include proper communication of net set of expectations to the employees, proper due diligence and not trying to change everything. The integral part of merging corporate culture is not to try to change everything as the employees will also get the room to work and adapt slowly to the changes.