Already bought and sold twice, a retailer that was on the market again for sale. The third buyer performed a limited due diligence process and initially, the purchase appeared to fit their portfolio requirements. The buyer failed to spot the risks of underinvestment and the lack of training of the personnel. The retail locations were swanky and looked well-designed from the outside. Behind the scenes however, there were critical issues that should not have been overlooked.
Opportunity
The key for the acquirer is to leave no stone unturned. Assume window dressing is happening. There is no leeway for a poor due diligence process.
It is essential in any acquisition to map out the ROI and additional benefits that are to be achieved post-acquisition. Having the right level of M&A support services will help drive the acquisition transition phase more smoothly to meet revenue and earnings expectations. A proper due diligence process is the first step for both buyer and seller to ensure the final success of the operation.
RadiusPoint and a logistics expert were brought onboard by the acquirer after the due diligence process to assess and correct a situation that was going from bad to worse.
Challenges due to a Poor Due Diligence Process
Immediately after the acquisition, our client saw their projected revenue plummet and earnings disappear. Together with our logistics partner, we identified critical areas immediately:
- Previous acquisitions had not integrated systems;
- Multiple head offices created confusion (no consistency or continuity of business);
- Retail locations had old, disparate point-of-sale systems;
- Inventories were not consolidated and controlled;
- Multiple warehouses created confusion and an inability to consolidate inventory;
- Customer experience was poor, with no system to identify, track or resolve issues.
Had we been hired to work with our client before the due diligence process, our client would have avoided overspending. Our pre-due diligence work would have resulted in a recommendation to pass on the purchase.
If you are starting the due diligence process on an acquisition or divestiture project, do not pass on the opportunity to receive the M&A support services that your team needs to ensure your project is successful and hits its financial objectives. Give us a call to discuss your project and how we could help.
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