How to Manage the New Due Diligence Process [Video]
Experts from Skadden provide insights and tips on what the due diligence process will entail in the future.
29 September 2020
As the global pandemic changes the way businesses operate, mergers and acquisitions (M&A) deal teams have had to adapt the traditional due diligence process. Ben Collins of SS&C Intralinks talked to Marie Gibson, a partner at Skadden, about what the due diligence process will look like moving forward, and what companies can do to mitigate challenges associated with the process. Skaden is a global legal firm that advises corporations, financial institutions and government entities around the world on their most complex, high-profile matters.
Thorough diligence remains critical to a successful deal, especially when it comes to distressed companies and reorganizations. “Due diligence will continue to be a key part of the process and looking at distressed assets,” Marie explains. “From the buyside, in addition to the traditional due diligence, there’s the usual focus on what impact the distressed situation has actually had on the company and its business.” She says asking questions about the cause of the distress and the presence of any compliance concerns will help ensure comprehensive due diligence.
Timing and weighing risk
Also important to due diligence is timing and risk management. “In all distressed situations, you need to be prepared to move fast. Sellers may be working on a particular timetable to try to get money in the door,” Marie says. She also notes that in bankruptcy court the process usually works quickly, which is another point organizations should keep in mind.
As with many deals, a certain level of risk is involved. “When you’re buying a public company you need to consider what litigation risk you may be taking on,” Marie says. “Especially in recent times, we’ve seen stock prices going all over the place. If you’re buying at a low point in the stock price you should anticipate shareholder litigation and potentially have to pay settlement costs.”
COVID-19 has certainly affected deal professionals’ day-to-day due diligence tasks, but teams have been able to acclimate to the new normal fairly quickly. Marie says that in the past couple of months the firm has certainly seen a lot of projects put on hold, but others are still forging ahead. And although aspects of diligence are certainly challenging during these times, teams are using electronic means to make things work; for example, a lot of negotiations previously done around a conference room table are now being done over WebEx or Zoom.
To learn more, watch Ben’s full video interview with partners from Skadden below.
Aiko Suyemoto is Intralinks’ Senior Associate on the Product Marketing team, supporting the M&A, Banking and Securities and Alternative Investments lines of business. She also has experience in corporate communications and business consulting.