Given the stakes involved with M&A it is essential that a deal team devotes due consideration to issue and risk management. Within a Smart M&A Platform, risks can be managed proactively via importing a best practice playbook with a few clicks. To deal with issues quickly and effectively, a deal team can use the Issues Log – helping to ensure issues are managed in the right way, in real-time and do not derail a deal.
In an M&A context, a deal team will have a good understanding of potential risks in advance of commencing due diligence. Issues, however, are less predictable and can arise without warning. By way of example, in scoping the due diligence phase of a deal, a deal team may ascertain that incorrect revenue recognition is a risk (e.g. due to the target selling services to customers via contracts spanning several years) – accordingly, review points around this area would be added to the due diligence checklist on a pre-emptive basis. A related issue that could arise when these checklist reviews are being carried out during due diligence is that the target does not have contracts in place with a number of key customers. In this example an initial risk has uncovered an issue.
Clearly, it is important that a deal team identifies risks prior to commencing due diligence. Preparing a detailed due diligence checklist provides a useful framework around the point of prioritizing risks specific to a target. A deal team can then develop a more detailed plan around how to manage risks proactively via carrying out detailed reviews across the due diligence phase of a deal. When it comes to issues, however, a deal team has to deal with these as they are encountered. Issue management is therefore of paramount importance.
Maintaining a universal Issue Log across a deal is central to an effective issue management process. Issues need to be logged when they are uncovered and made visible to key decision makers such as the Steering /Deal Committee. Using the Issues Log functionality of a Smart M&A Platform provides a powerful way for a deal team to log issues in real-time and eliminates the chance of issues becoming siloed (such as if they are stored on a team member’s desktop or in an Excel tracker seldom shared with the wider team). Ultimately, without a defined approach to initial risk identification and issue management a deal team exposes an organization to unnecessary risks.
Additionally, Issues can be “pushed” to the next stage of a deal with a few clicks – for instance, the Due Diligence team can push issues to the Integration team so that these are sitting in the Day One integration checklist ready to be actioned.