A company had been very successful in its field for several years and attracted the attention of a larger competitor, who wished to buy them.  They entered talks and the company employed a firm of corporate finance advisers at a firm of accountants to undertake limited due diligence work on the acquirer.  Equally the potential acquirer employed another firm to undertake their due diligence.

The main concern for the directors was to keep the potential acquisition a complete secret internally.  They needed some expert resource to answer the due diligence questions from the potential acquirer.   We were appointed to do some “budgeting and forecasting work”.

The company’s accounting records were good, so answering the questions proved to be fairly straightforward, and the process developed quickly.  We were asked to attend the project meetings with the corporate finance advisers and were able to see “both sides” of the project.  It became clear that the projections of the potential acquirer were significantly more aggressive than those of our client, and as they worked in the same industry that caused significant debate.

The purpose of the due diligence work is for both sides to understand what the proposed deal would really mean in practice, and to that extent it worked.   We succeeded in keeping the project secret from the employees, and the ultimate decision was not to proceed with the deal.  The reasons for withdrawal remain confidential.  You might be surprised how many deals end up like this.