Client’s Challenge: An M&A Team Considers a New Target

This firm was interested in investing in a complex but largely unregulated manufacturing market. The firm’s M&A team was attracted to the potential for a solid return on investment. But the team also recognized the downside risks related to the lack of regulation and the unknown management team. This exposure could not only wipe out the value of the investment but also, in this particular product category, result in harm to or death of consumers.

When its deal team was approached with a seemingly irresistible takeover opportunity, it came to us and asked, “Are we throwing our lot in with the right people here. What do we not know?”

Our Solution: Examining the Prospective Partners

Hillard Heintze coordinated its investigations team and field associates across three countries on two continents to uncover pertinent information – positive or negative – on a few executives at the top of this manufacturer’s leadership structure. With the investigation’s international scope came a bevy of challenges. These included knowing precisely how to navigate each of the three countries’ complex regulations and information-acquisition laws, determine the availability of public records, identify key sources to approach discreetly, and resolve the often unique cultural and language challenges that can surface in due diligence initiatives such as this one.

Impact on the Client: Insights that Proved Prescient

The investors’ hunch proved correct. Their prospective acquisition target may have appeared irresistible on the surface, but with each source inquiry, new information emerged confirming why this industry was viewed by many as the “Wild West.” Through these interviews and analysis of security filings, court records and online message boards, the Hillard Heintze team peeled away layers of increasingly more questionable and suspicious business activity.

The acquisition was promptly called off. Just a few months later, the move would prove prescient: the target company’s leadership was replaced, and its stock subsequently disintegrated, falling to pennies on the dollar off its peak when the investment courtship first began.

Unplugged: An M&A director breathes a sigh of relief

“We already knew these guys were good manufacturers. What we needed to know was whether they were good managers.

“The telltale moment was probably when they were asked a straightforward question about ethics. They essentially didn’t have a comment, and that made us quite nervous.

“Sometimes not saying something really says a lot. In the end, it just wasn’t worth the risk for us.”

Related Case Studies
View All