Due diligence fails to impress cross-border business buyers

European companies believe that cross-border acquisitions are riskier than domestic ones, but most have low expectations of the value of due diligence. Worse, an Ernst & Young/Warwick Business School survey of more than 140 companies in six countries found that, the more experienced a company, the less valuable due diligence is seen to be.

Some buyers even worried that if their target business was being offered to a foreign buyer, it was because local bidders knew better.

Yet the survey found that experienced M&A dealers regarded the due diligence process as adding little more than ‘comfort that there were no black holes’ and were more likely to rely on their own resources.

The report speculates that ‘it may be that experience leads to a greater awareness of the imperfections and high cost of due diligence’.

Two-thirds of respondents suggested improvements. Many said that they should provide greater knowledge of markets or offer a deeper understanding of corporate culture. One in eight said costs should come down.

European acquisitions: Getting it right; available from Brett Savill on 0171-931 5226.