DUE DILIGENCE: LEARN FROM THE PAST, : A qualitative study of how Strategic DD could be a way to

Abstract: This paper presents an analysis on Due Diligence process as a tool to reduce the Mergers and Acquisition (M&A) risk of failure which is used by the acquirer to gather quantitative but also qualitative information about the target in the pre-merger deal, before to sign the agreement of the deal. However, the process is sometimes unknown or underestimated since the executives sometimes want the deal to be closed as soon as possible, and neglect some critical factors which can be important to get a true vision of the target and therefore increase the chance of success of the deal in future. In the view of the enormous economic significance in M&A transactions numbers and volume, it is alarming that more of half of all transactions do not lead to the desired objectives. To investigate in this problem, some studies have emphasized Due Diligence impact to increase M&A chance of success. Indeed, Due diligence is viewed as the only way to find out as much information as possible on the target company. It is a way to conduct a comprehensive investigation into this potential target. In this thesis, we will focus on Financial Due Diligence which is an unavoidable way to evaluate the target to allow getting financial information, but show its limits. That is the reason why, we will highlight the role of the Strategic Due Diligence in this paper, which fulfill the FDD limits since it allows the bidder to thinks strategically as each deal is unique in what its value drivers are. Finally, in this paper we concluded that the SDD is the way companies should perform the DD to increase the M&A chance of success since each deal is unique in what its value drivers are and that is what SDD is all about. To support our paper, we have addressed two interviews with 2 financial analysts who work in audit companies located in Stockholm to gather their points of view on the subject. Moreover, both of our case studies on BNP Paribas and HP provide illustrative example on how financial and strategic Diligence can be conduct.