Management Due diligence

Management Due Diligence for Private Equity and M & A clients

Management Due Diligence is the process of forensically acquiring data-driven insights that add value beyond that acquired through the conventional cycles of financial, legal and commercial due diligence.

The nub is to endorse (or not) investor trust in the management team to execute the investor’s value creation plan towards exit (where the latter meets both the investor’s criteria for success and the approach to getting there).

Independent scrutinising, evaluating and reporting on the target business’s leadership and management and their likely future effectiveness, identifies the issues for different types or intensity of support in order to maximise the likelihood of success.

While here we argue the importance of evaluating senior management, beyond leadership, roles, structures, culture etc., all play their part too.

There is an interesting paradox in this whole area. The focus on leadership and related issues is often done soppily. Yet, subsequent evidence clearly and recurrently suggests that inappropriate weight given to the due diligence of the “soft” factors, often underpins investor disappointment.

Despite the complexities of placing a monetary value on intangible, human capital is widely accepted to be a company’s most important asset.  Yet, many investors fail to carry out management due diligence as part of their mergers and acquisitions (M & A) strategy. Investors, private equity clients and funders increasingly recognise the importance of having the right management and leadership in place if the business is to be scalable and successful.  

Our consultants have vast experience of assessing leaders and teams to understand what skills, motivation, and ambition they have and how well they work together.  Effective leadership is fundamental to the success of any organisation and can be the difference between organisational success and failure.  Our management due diligence process provides a clear understanding of the strengths, development areas and risks of leaders.

We advise boards and private equity investors utilising depth analysis of data and interviews forming the basis for detailed management due diligence advice.

How does Management Due Diligence make a difference?

The benefits of management due diligence are:

  • Helping investors and boards to understand the capabilities and motivation of leaders.  This includes measuring the appetite of leaders to continue after their earn out milestones.
  • Identifying individual and collective leadership capability and potential to scale and grow the business.
  • Understanding the supportive or restricting aspects of culture, and of cultural fit and alignment to the values and mission of the newly acquired or merged organisation or leadership team.
  • Benchmarking leadership teams against relevant sector, functional and professional standards pegged against future business needs.
  • Mapping potential leadership, management or “soft issue” risks, issues and potential de-railers with the objective of creating an appropriate planned response. 

Not limited to leadership teams

As part of the human capital planning process MDC Advisory can also advise on succession planning and hires as well as organisational design.


Want to find out more?

To find out how some of our clients have achieved the most business benefits by utilising our proven due diligence techniques, click here.

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