Diligence is where you will examine the target company, gather as much information as possible, and prove that this asset is what you thought it was and that it can deliver the value you expect. It can take a lot of time, people, and resources to complete the entire diligence process.
Of course, you want to be as thorough as possible. You feel the need to turn every rock and shake every tree before you sign and agree to any deal. But this does not mean that you need to ask 1000 questions. It can take a year to finish everything before answering all the lingering questions you have in your gut. You can be thorough and efficient all at the same time.
"Time is the ultimate finite resource in our lives, but also in deals. That's why it's supercritical." - James Harris
Making your diligence efficient is in your best interest. Not only does it save you money, but it also helps ensure deal success. Deal fatigue is one of the leading causes of failures in acquisitions. When your team is burned out from the long process of your diligence, their interest starts to dissipate. They will not be at their best, they will feel the need to rush, and this results in lower standards, more risks, and eventually, a higher likelihood of value leaks.
Furthermore, an efficient diligence process will allow you to identify early whether this is a deal that you want to pursue or not. This can save you a lot of stress, time, and money, compared to doing weeks or months of diligence, only to find out that this deal does not serve your company well.
Lastly, the seller is running a company while trying to accommodate your diligence requests. Bombarding him/her with endless questions might distract him from running the business you are trying to acquire. Repetitive questions can also frustrate the seller as different functions tend to ask the same questions due to lack of communication and inefficient diligence process.
Again, making your diligence process efficient is best for your organization. It makes the deal more successful, prevents frustrated sellers, saves you money, and will keep your team sharp and engaged. If you want to know what you can do to make your diligence more efficient check out the course from James Harris, Principal, Corporate Development Integration at Google below.