Private Equity
February 22, 2023

The Pitfalls of Passion-Driven Due Diligence: Overlooking Fundamentals

The Pitfalls of Passion-Driven Due Diligence: Overlooking Fundamentals
Private Equity
February 22, 2023

The Pitfalls of Passion-Driven Due Diligence: Overlooking Fundamentals

Ignacio Gassó
Co-founder & Chief Operation Officer
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The importance of due diligence in M&A activities cannot be overstated. Due diligence is a thorough and comprehensive investigation that is conducted before a deal is made to assess the value and risks of the target company. It is the process of investigating and verifying the accuracy of information provided by the target company to ensure that there are no hidden issues that could potentially harm the buyer.

Luis, a seasoned professional in the field of M&A, emphasizes the importance of due diligence in his response. He notes that the success of the due diligence process is largely dependent on the deal itself. If the deal is unique and exclusive, the buyer may be under pressure to move quickly, resulting in a more challenging due diligence process.

On the other hand, if the deal is part of an open bidding process, the due diligence process may be less challenging, as there are clear timelines and guidelines to follow. The least successful due diligence processes are often driven by passion or a unique perspective, which can lead to the neglect of fundamental economics and models.

Luis stresses the importance of thoroughly validating each reason why the company is being purchased, and not just theoretically, but by validating the data as well. This process involves asking difficult questions and making assumptions that are then validated by thorough investigations.

Luis is well-versed in the importance of conducting a comprehensive investigation. His expertise in due diligence helped him integrate into Harver, where he now serves as the Chief Revenue Officer. With Luis's experience and expertise, Harver can better navigate the challenging M&A market, ensuring successful due diligence processes that lead to profitable acquisitions.

In conclusion, the importance of due diligence in M&A activities cannot be overstated. Luis's insights on the importance of a thorough and comprehensive investigation serve as a valuable reminder for any organization considering M&A activities. With due diligence, organizations can make informed decisions and avoid costly mistakes that could harm their business.

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