M&A Due Diligence Checklist vs. Enterprise Performance & Growth (EP&G) Scorecard
The current M&A due diligence paradigm (i.e., deal team/transaction-focused mindset and general-purpose/process-driven software tools) has relied on the terribly outdated “due diligence checklist” as the preferred facilitation tool for a buyer to learn as much as possible about a seller during confirmatory due diligence before completing a transaction.
DiliVer believes that having a checklist is much better than not having one at all; having a good checklist is certainly better than having a bad one; but that converting your checklist into a DiliVer Enterprise Performance and Growth (EP&G) Scorecard based on our new M&A due diligence paradigm (i.e., combined entity/outcome-focused mindset and industry-specific/data-driven software tools) is the very best scenario to help executives make better business decisions about transactions. In summary, a checklist vs. scorecard comparison is as follows:
- Unstructured Document
- No Metrics
- Open-Ended, Multi-Part Questions Mixed with Documentation Requests (for Repository Storage in Some Data Room) and Other Action Items (for Workflow Confirmation)
- Answers to Questions in Separate Prose Document
- Structured Document
- Metrics-Based with Analytics
- Only Single-Point Questions with Key Performance Indicator (KPI)-Driven Answers; Documentation Requests and Action Items Handled Separately
- Answers to Questions in Scorecard Itself
DiliVer uses two types of EP&G Scorecards:
- Buyer (External Assessment) Scorecards — based on appraisal categories and appraisal factors
- Seller (Internal Assessment) Scorecards — based on strategic goals and strategic objectives
EachEP&G Scorecard aggregates (at the Tier 1 enterprise-wide view) fourteen Tier 2 scorecards below it (based on our intellectual property) with all of the due diligence questions, answers, and measurements that represent the respective buyer or seller deal thesis. For each Tier 2 scorecard, user-defined sub-classifications may be used to group related due diligence questions, answers, and measurements for story-telling communications purposes. Think of theEP&G Scorecard as the window into an enterprise’s performance data, and realize that this standardized data can be used to compare deals.
DiliVer Request → Please tell us about your M&A due diligence checklist and any negative experiences you may have encountered while using it, and tell us whether or not you use any metrics over and above financial metrics during due diligence.