Abstract
Mergers and acquisitions (M&A) represent one of the most common ways for firms to achieve non-organic growth, and one of the main stages in the typical M&A transaction is due diligence of the target company. The aim of this paper is to provide a guideline for conducting due diligence process in the digital environment. After a brief introduction on the nature, purpose and elements of the due diligence, the paper elaborates various risks, and psychological and contextual hazards often occurred during due diligence process. Special attention has been paid to the elaboration of the role and importance of the digital due diligence as a new concept in today’s contemporary ‘digital’ economy. The outcome of this paper is to provide a comparison between ‘traditional’ and ‘digital’ due diligence, digital due diligence methodology, and easy understandable check list for conducting the process of digital due diligence.
Highlights
In the process of buying a stake in another company, detailed insights about the target company’s performance and operations will not be obtained by analyzing only the financial statements, because they only provide a summary of business processes and do not provide other significant information that is crucial for each aspect of company's operations, such as: performance and experience of the management, production capabilities, product or service quality, operational efficiencies, potential synergies, etc
Fast-growing companies are often paid higher premiums, there is often more uncertainty in these markets and there is a greater possibility of increased business dynamics
A company’s digital competence is becoming increasingly important for its position, strategy, and longterm profitability, the examination of digital aspects during due diligence analysis is still often overlooked. Both for investors, are a challenge for appraisers themselves, but digital due diligence can reveal a lot that would remain obscured by traditional due diligence
Summary
In the process of buying a stake in another company (merger and acquisition process), detailed insights about the target company’s performance and operations will not be obtained by analyzing only the financial statements, because they only provide a summary of business processes and do not provide other significant information that is crucial for each aspect of company's operations, such as: performance and experience of the management, production capabilities, product or service quality, operational efficiencies, potential synergies, etc. Digitalization has revolutionized business processes and spurred the development of new products and services. The development and implementation of digital technology and the emergence of new, digital business models, create the need for in-depth analysis of the same, given that their evaluation can significantly affect the value of the company. Digital due diligence is a structured process for analyzing and evaluating digital business models, processes, and company's potential. The analysis of digital companies differs from the analysis of ‘traditional’ ones. The reason for this mostly lies in the much higher value of intangible assets of these companies, ie the fact that their value is based mainly on their digital business models. In addition to the classic due diligence, digital due diligence requires careful examination and assessment of the digital potential of the company
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callMore From: International journal of contemporary business and entrepreneurship
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
