Case Study 05

Acquisition due diligence study kills the deal

Situation

The client is a manufacturer of on-highway transport equipment. They have reached Letter Of Intent on the acquisition of a niche trailer company.

Outcome

Clarity was engaged to produce an acquisition due diligence study. The scope of our work included direct interface with the principals of the acquisition target. As stipulated in the LOI, the seller was required to supply customer information in support of a 3rd party market study. Clarity carefully presented our research methods and supplied an Interview Guide in an effort to allay the seller's concerns about this study. Every seller, and particularly principals of private companies, are very nervous about the rumor mill and other negative impact to their business if a deal is not consummated. Clarity proceeded to call on current customers and identified historic customers. Our research revealed serious goodwill and reputation problems that ultimately killed the deal.