The financial due diligence process of mergers and acquisitions : an investigation

Abstract

Purpose: The purpose of this study is to analyse the due diligence process applied in a merger and acquisition transaction mainly focusing on the financial due diligence process and the implications involved therein. Accordingly, this study also assesses the current local application of the due diligence process. Design: The objective of this study was achieved through a series of semi-structured interviews with the big four audit firms being; KPMG, PwC, Deloitte and Ernst & Young. Findings: The due diligence process is an important exercise in the local scenario as it is conducted in any merger and acquisition transaction. With regards to the financial due diligence performed by audit firms it would assess all the financial, accounting and taxation aspects of the target company. Conclusions: The due diligence process is essential in any merger and acquisition transaction. The due diligence process does not only verify past performances and look for black holes but also assesses future prospects making it a tool for successful transactions. Value: Hopefully, this study will lead to further local research in the subject matter primarily with respect to the main recommendations identified in this study, being assessing the due diligence process from the acquirer point of view and analysing the legal due diligence applied by law firms.