When to Walk Away from a Deal

by Geoffrey Cullinan, Jean-Marc Le Roux, and Rolf-Magnus Weddigen

DEAL MAKING IS GLAMOROUS; due diligence is not. That simple statement goes a long way toward explaining why so many companies have made so many acquisitions that have produced so little value. Although big companies often make a show of carefully analyzing the size and scope of a deal in question—assembling large teams and spending pots of money—the fact is, the momentum of the transaction is hard to resist once senior management has the target in its sights. Due diligence all too often becomes an exercise in verifying the target’s financial statements rather than conducting a fair analysis of the deal’s strategic logic and the acquirer’s ability to ...

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