Six Ways to Reduce Stress During Due Diligence

Pursuing M&A is a passionate process. Emotions run the gambit from excitement in finding a new deal to anxiety about risks uncovered during the acquisition.

I’ve found due diligence and negotiations to be among the most stressful times during mergers and acquisitions. Here are six ways to help everyone keep their cool during these critical stages.

  1. Write everything down – I cannot stress this enough! Nothing is more frustrating than coming to an agreement only to forget the exact terms. By recording your agreements, you can avoid renegotiating key elements of the deal. It’s hard enough to come to one agreement in the first place, much less two.
  2. Get organized – Have a member of your acquisition team act as the “librarian.” This extremely detail-oriented person will keep track of the large amount of data you receive and carefully organize and catalogue it so that it’s readily accessible when needed.
  3. Gather your questions – There is no need to call or send emails with every question; you don’t want to kill the seller with paper cuts. Collect all your questions together and present them at one time. This will also help your librarian manage all the information gathered during due diligence.
  4. Apply your criteria – Go back to the basics. Use your strategic criteria and objective metrics to calm emotions, help resolve any differences of opinion on your own team and promote meaningful analysis rather than heated debate.
  5. Use a third-party advisor – Your advisor can act as a “lightning rod” when communication between you and the seller is strained. The seller will likely feel more comfortable sharing their concerns with the advisor rather than with someone who might be their future boss. Your advisor can help ease any fears and clear the air while protecting your relationship with the seller.
  6. Have options – Last but not least, have more than one option. We recommend our clients be in serious talks with at least three other acquisition prospects and have many more in the pipeline. This way you won’t feel trapped or pressured into making a deal if you uncover any red flags.

While these tips won’t eliminate all stress from due diligence, hopefully they will help you and the seller through to a successful conclusion.

Photo Credit: Amy McTigue via Compfight cc