Red flags in potential M&As

by a searcher from Instituto Tecnológico de Buenos Aires

1 month ago

What are the key red flags (both financial and operational) you look for during due diligence in a potential acquisition?
I’m curious about your insights and experience about the critical aspects to focus on, beyond just the financials. Do you have any best practices for identifying risks early on?

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10 comments

searcher from Rice University - Jesse H. Jones Graduate School of Business

The more you know the industry the better you’ll be able to know where to look. I’d look for deal killers: key man risk (ex.) sales person with all the relationships you can’t lose), customer concentration, if there’s a warehouse and you can walk it - the cleaner and safer the higher odds the business is run well, same with clean books

4 weeks ago | like reply | 0 likes

intermediary from City University of New York (CUNY) System

A few red flags to watch, Tax vs internal statements have large margin of differences, inability to provide up-to-date info, background and title searches yield unknown details, unrecorded employment contracts or verbal promises, key employee relationships and misunderstanding of what they expect if a CofC occurs, unpublished owner/customer/vendor relationships that have large financial impacts if changed, industry changes and future headwinds that are not discussed/exposed.

1 month ago | like reply | 0 likes

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