It has rightly pointed out the benefits of due diligence and this fact cannot be over emphasized. According to Perry and Herd (2004) ‘Between recognizing the potential value or a merger or acquisition and achieving a new and fully integrated enterprise is a dangerous middle ground where anything can happen” It is because of this dangerous middle ground that many have advocated that due diligence should be given a second look. The issue is not the carrying out of due diligence but the efficiency and effectiveness of the exercise.
Perry and Herd (2004) advocated three reasons for the increase in the dangerous middle ground, the reasons are cross-border transactions, increased expectations and difficulties in untangling companies that have entrenched behaviours.
Engle (2011) warned that due diligence should not be undertaken when decision has already been made as to acquire or merge. According to him doing due diligence when agreement has been said is difficult because then the process is seen as one last hurdle in a long, painful process and the champagne is on ice. Due Diligence must be done before agreements are signed.
Engle (2011) summarized the key aspect in the due diligence process incluedes
(i) Careful planning
(ii) Collection of information both within and outside the firm.
(iii) Attaining a working knowledge of the organization in the following areas.
(a) industry – nature of industry and who the key players and the cycle in the industry
(b) financial condition, verifying and not just trusting. All financial data must be verified
© customers- who are the customers and contingency plans if they are lost
(d) competitors – who are the keys competititors and what are the strength and weakness
(e) suppliers- key suppliers and plans to manage disruption or defection.
(f) business processes and technology- a review off the whole business process and technology behind, can the processes of technology fit into the proposed buyers’ or need overhaul.
(g) management, the strength and experience and performance of current management, are they willing to staff and help on.
(i) Staff- Who are the key staff members and are there agreements in place as to retrenchment benefits, conditions of service etc
(j) Organisational culture should also be reviewed and how quickly can integration take place.
Perry and Herd (2004) concludes by saying that various risk factors must be identified and contingency or management of these risk should be clearly outlined during the due diligence process. Example of these risk factors are
(i) Customer loss
(ii) Pricing pressure
(iii) Competitive attack
(iv) Loss of key personnel
(v) Lack of skills
(vi) Cross-border resistance
(vii) Supplier or distributor defection
(viii) Unproven technology
(ix) Labor uncertainty
(x) Regulatory uncertainty
(xi) Negative media coverage

Perry, J.S., and Herd, T.J., (2004),"Reducing M&A risk through improved due diligence", Strategy & Leadership, (32) 2 pp. 12 – 19, (Online) Available at http://www.emeraldinsight.com.ezproxy.liv.ac.uk/doi/pdfplus/10.1108/10878570410525089 [Accessed 22 July 2015]
Engle, P., (2011), 'Doing due diligence', Industrial Engineer: (43) 9, p. 20, (Online) Available at http://eds.b.ebscohost.com.ezproxy.liv.ac.uk/eds/pdfviewer/pdfviewer?sid=bbf835bb-e438-4fc8-9700-536a5fa9ba82%40sessionmgr115&vid=1&hid=126 [Accessed 22 July 2015]