Abstract
Organisations are under constant pressure to grow in the face of increased competition, changing conditions, and increasingly relaxed country and currency regulatory environments. In order to remain a player or an idustry leader, it’s imperative for companies to achieve real growth. Mergers and acquisitions (M&A) are an external mechanism for organisations to achieve growth. There are different stages in the typical M&A transaction. The due diligence stage of a transaction is critical in evaluating whether to proceed with a deal. It provides essential information that is used in setting negotiating parameters, determining bid prices, and providing a basis for integration recommendations. The due diligence process, therefore, should be managed effectively to ensure a higher probability of success for the deal. A systematic literature review was undertaken to establish the key concepts behind due diligence. Due diligence is multidisciplinary in nature, thus a wide range of literature was reviewed to gain a holistic understanding of the process. Concepts identified during the review were then individually examined. Similar concepts were grouped together into a new concept. The outcome of this paper forms the basis of a conceptual framework that captures the key areas of due diligence, the due diligence process and principles.
Highlights
AND PROBLEM STATEMENTOrganisations are under constant pressure to grow in the face of increased competition, changing conditions, shrinking gerographical boundaries, and increasingly relaxed country and currency regulatory environments
This paper presents the findings of a systematic literature review for the due diligence stage of an Mergers and acquisitions (M&A) transaction
Due diligence forms a critical component of the mergers and acquisitions process
Summary
AND PROBLEM STATEMENTOrganisations are under constant pressure to grow in the face of increased competition, changing conditions, shrinking gerographical boundaries, and increasingly relaxed country and currency regulatory environments. Traditional methods of achieving organic growth, such as new products, markets, and efficiencies may only assist in growing the organisation to a certain extent. Mergers and acquisitions ( referred to as ‘M&A’) are an external mechanism for organisations to achieve real growth. Organisations see M&A as an alternative strategy for expansion and growth [4]. This is indicated through the increasing value of M&A deals year on year. Angwin [15] defines due diligence as a comprehensive process of investigating and evaluating business opportunities in mergers and acquisitions. Traditional due diligence includes the review and analysis of ‘hard data’ about the business, and typically covers aspects such as products, financial assets, business models, and technology, with most of the focus being placed on legal and financial issues [16]. The first is the market, where questions — such as the size of the target market, the rate of growth of specific segments, any threats that exist from rival products or technologies, and the extent to which the market is influenced or controlled by the government — should be asked
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