What is the Gift and Entertainment Policy? How do I manage it?
Even with so much data available and significantly more techniques to extract information, companies are still trying to eliminate Due Diligence mistakes. There have been some of the biggest failures for due diligence with conglomerates worldwide, running into billions of dollars in losses.
Due diligence is a process of gathering and analysing information before making an important investment decision. It helps the party prevent potential risks, losses, or damages.
There are different elements or types of Due Diligence like financial, technical, commercial, and legal. It is performed on entities like customers, and vendors, equity research analysts, broker-dealers, individual investors, and fund managers that are looking forward to acquiring any company. However, with notable disasters in the history of due diligence, there are some basic points that need to be covered for performing due diligence with a properly formed questionnaire.
Examples of Due Diligence:
The Gifts and Entertainment exchange between an organisation and its customers, suppliers or business partners is an essential and acceptable part of the business. However, if the gifts and entertainment received or given are of substantial value, then, it may create an actual or perceived conflict of interest.
1. The 2004 case study of the infamous AOL’s acquisition of Time Warner was a huge disaster. While the expectations were great, there was a huge urge to capitalize on the confluence of the internet and mass media. It was a rushed and conventional due diligence that failed to identify the transaction’s vulnerability and weaknesses. The losses incurred were up to US $99 billion.
2. Another, Daimler Chrysler case study of 1998 costs US $36 billion in losses, there was no actual due diligence before the transaction happened, as one of the Daimler’s board members later confided that advice was taken from Goldman Sachs for the transaction to take place, however, the company management was mainly blinded by Chrysler’s profits. There were inculpates and guilty figures from both sides that lead to civil war within the conglomerates.
Due Diligence is conducted to inspect and evaluate the target company’s affairs in order to make an informed decision about whether or not to proceed with a merger. In this process of mergers, one thing important to note is that not all data shall be open to you. As you get serious about mergers, you can ask for more proprietary information.
If you are looking at conducting due diligence for an organization or entity, our highly customisable application software can prove to be a one-stop solution. Fill up this quick form and get in touch with us. Our team of experts shall be happy to align a quick demo to take you through our offerings. You can learn how to conduct due diligence on your target company by clicking here.