When making an acquisition, it pays off for the acquiring company to add a due diligence inventory of locations, services, and contracts. This is one of the BPO specialties of RadiusPoint, and after 30+ years of providing this type of services to multiple industries, we have seen the undeniable value of this step in the process.
This short case study focuses on the losses incurred by the acquirer of a target company as a due diligence inventory of telecom services and contracts was not completed during the acquisition transition period — a vital step of the technology expense management process.
Challenge
A service company in the aviation industry purchased a group of locations at various airports throughout the United States. Consulted on several aspects of the acquisition process, RadiusPoint recommended a due diligence inventory be made of the telecom services included in the purchases. However, the acquirer’s management team declined.
Throughout the integration process, the transition proved problematic for the Accounts Payable team of the acquiring company, and the transition timeline had to be extended well beyond the allotted timeframe.
Issues
- Accounts and services were on the sellers’ corporate accounts: they could not be moved without proper documentation from the seller
- Multiple invoices were marked as not being part of the sale BEFORE they were transitioned to the buyer
- Services were terminated by vendors due to the buyer’s transition team moving too slowly
- Contracts failed to be renegotiated despite an increase in spending
Outcome
The acquiring company lost money because the lack of a due diligence inventory prevented them from identifying that the services actually belonged to their purchase.
A year after the transition, RadiusPoint identified location-specific invoices that were NOT part of the deal but had been moved over to the acquirer.
In just one instance, over $15,000 in services were paid for a location that was not a part of the purchase.
Partnering with RadiusPoint for your due diligence inventory
RadiusPoint can provide:
- Costs benchmarked and brought under control to stop overspending
- Plans to move from higher-cost space to lower-cost space
- Restructuring of logistics and eliminating redundant warehouse space
- Processes to define procurement better and cut costs