Due Diligence in the Digital Age: What We've Lost
M&A professionals are now free to work at diligence at their own pace, in their own offices or homes and at all hours of the day and night. However, virtual due diligence comes with some often-unacknowledged downsides.
December 09, 2015 at 07:48 PM
8 minute read
M&A professionals of a certain vintage fondly recall the due diligence trips of their youth. These offered the enthusiastic M&A warrior the opportunity to visit cultural meccas such as warehouses in Orlando, tanneries in upstate New York and nameless office parks across the Midwest. With a plane ticket in hand, young law firm associates would be transformed into members of an elite cross-disciplinary strike force including accountants, bankers and clients.
The target was the data room—this citadel would be guarded by a young Harvard Business School banker posing as a well-dressed librarian, checking documents in and out on a sheet clamped to a clipboard and watching over the data room prisoners. For the lucky ones, a visit to the company's offices and filing cabinets might be in store. Imagine the excitement of a young associate facing a wall of file drawers and being told “what you need is in there.” Hours of sifting through hundreds of badly labeled folders to find unexecuted or incomplete documents followed. Copying of documents was not allowed, and phones back then did not take pictures, so the young professional had to read as fast as possible and focus only on what was important.
There were highlights in this process. One was the camaraderie of the team members at the end of the day. While the lawyers may have longed to bill hours all night, the guardians of the data room usually took a dim view of this. At closing time, well-organized clients would download with the team. Each of the reviewers, no matter how junior, would offer their commentary to the group. Listening to the reports, law firm associates would have the opportunity to hear about valuation models, tax returns and financial statement issues. The client would receive immediate feedback on the issues of the day and instruct the group's activities for the day to come. At the end of it all, the group could enjoy the best local food and drink available and bond for a few hours before it started all over again.
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