Due Diligence is a reason that 62% of mergers and acquisitions fail to achieve their financial goals. There are a variety of ways to avoid this outcome.

This article explores the basics of due diligence by reviewing the different kinds of data which must be analysed to assess the health of a firm and determine its value. This includes analyzing a firm’s competitive environment, profitability, and growth potential click to read in an uncertain economic environment.

The first step is to analyze the consolidated balance sheet of a company, paying particular attention to the cash balance and amount of long term debt. Investors will be able to determine how the company is managing their expenses and how they meet short-term cash needs in a challenging economy.

It is also vital to assess a company’s strategy position, including the potential growth of its product lines and market share in its current markets and the effectiveness of its innovation capabilities. Investors should also consider the supply chain of a company to determine its capacity and risk in a volatile economy, including whether it can handle fluctuations in customer demand.

In addition to studying the data, it is essential to know the company’s management and leadership. This will allow you to discern any hostile behavior that might affect the acquisition company’s operations after the sale. It is also essential to know the cultural differences that exist between the two companies. This will enable the M&A team to develop strategies to overcome any integration challenges.