Friday, June 6th, 2014

M&A – – Due Diligence

Terry Putney, is that you with Rita?Terry Putney and Joel Sinkin of Transition Advisors have been writing a series of articles for the Journal of Accountancy over the last 12 months. It has been a year-long look at issues affecting succession for CPA firms.

The most recent issue of the Journal is out and Putney and Sinkin have focused their last article on the Do’s and Don’ts of Due Diligence.

I relate to how they describe due diligence as beginning when you first meet a potential M&A candidate and it every step along the way. You are continually assessing whether a combination of firms would meet your goals and expectations.

However, there is a more specific, intensive review of firm data that we usually think of when we hear the words: due diligence.

The authors tell us that the first step, as you start formal due diligence, is to exchange lists of what each side wants to see. To manage time and priorities, break the review down into three categories:

  • Things that are readily available and can easily be delivered, for instance, by email. Examples are financial statements, tax returns, employee handbooks, leases, and employment agreements.
  • Things that might require some effort pulling together, such as accounts receivable, breakdowns of client information (fees, industries, tenure), and operating metrics on productivity.
  • Information that can be gathered only in the field, such as a review of workpaper files and quality-control processes, inspections of office and equipment, and interviews of key people.

Be sure to follow the link, above, and read the entire article in the Journal. The link to the article will also give you links to the other eleven articles in the series.

(Terry Putney, is that you with Rita?)

  • "What we hope ever to do with ease, we must first learn to do with diligence."
  • Samuel Johnson

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