The use of technology in due diligence has never been more important than it is now.
While due diligence in a remote world may present new challenges, the increased use of virtual data rooms and video conferencing services such as Zoom and GoToMeeting have facilitated this process immensely.
It is no longer business as usual, as the corporate world continues to shift as a result of the coronavirus outbreak in early 2020. The new norm for M&A transaction processes will involve a host of considerations, issues and deal terms that were not relevant before Covid-19. For buyers, due diligence will be more important than ever before. Given the M&A opportunities in the market, buyers and sellers must have an increased focus on gauging risk and value going forward.
Buyers and sellers should now be anticipating logistical changes to M&A dealmaking. Due to ongoing government and travel restrictions, office closures, and quarantine measures, buyers should have a strategy in place to optimize resources surrounding due diligence.
Parties to an acquisition should also factor in additional time for a thorough diligence process, as there should now be heightened scrutiny of novel business and legal issues that were not paramount to past analyses. The challenge is how best to understand the impact they will have on the future success of a business.
Buyers will need to have these issues mapped out in advance in order to request and analyze the necessary information. For example, the target’s employment policies should be scrutinized to understand how the business is handling the new regulatory environment and best practices in managing the workforce. A fundamental inquiry will focus on the target’s compliance with federal, state and local laws, regulations and ordinances, as well as the attendant costs of such compliance currently and into the future. A buyer must now understand, from an operational and technological standpoint, how well a target company supports remote working and the myriad of data protection, cybersecurity and privacy issues that present significant risk.
Other business issues with increased importance in due diligence include a target’s potential supply chain disturbances, key customer business issues, and insurance coverage for business interruption and other similar risks. read more