Last week I discussed how the deal screening process works, and with this post I'll finish up this series that looks inside the new corporate development function, by providing an overview of the due diligence and integration teams and committees. In a future series I'll write about the tactical things you can do to make your company more attractive from a screening, diligence and integration standpoint.
Due diligence hasn't changed much over the years, but two trends I see more of these days are larger, multi-disciplined teams; and the use of due diligence committees. It used to be that an attorney, banker, accountant and a couple of people from the company would sit in a law firm's conference room and wade through boxes of documents for a few weeks. Now, there tends to be a lot more operational people involved, and since many of the data rooms are virtual, it's much easier to directly include several ops functions. Use of a diligence committee also seems to be gaining popularity. This committee is made up of C-level execs and business function leaders from the due diligence team. The committee meets regularly to review the status and findings of diligence, and to ask "hard" questions. Often this committee has built-in stops, or pre-determined times where the members must discuss or vote on whether or not to move ahead with the transaction.
Integration hasn't changed much either, but it's planned for much sooner than in the past. Integration used to start right after the deal was signed, as it was commonly referred to as post-merger integration or PMI. Everyone now talks about how critical pre-merger integration planning (PMIP I suppose?) is. Thus the integration team and committee are put into action at the same time due diligence commences.
Here's what you need to understand as an entrepreneur. First, both teams (diligence and integration) are often staffed by the same people - that's not new, as for years diligence teams morphed into integration after the close - what's new is that they now do diligence and plan integration at the same time. Believe me this really changes the flavor of due diligence, in addition to making it take longer. Second, this is extra credit for the operational members of the teams. They all have primary job responsibilities to get done as well, and they were all probably told, not asked, to be on the team. So do yourself a favor, and treat them with the utmost respect and courtesy. Remember their names, offer to get Starbucks not the stuff in the kitchen, walk them to the restrooms instead of providing directions, laugh at their jokes and listen attentively to the same stories they told you yesterday. Due to the committee system, these people now have power!