2 C. Porsgaard et al. / Journal of International Management 00 (2017) 000–000 Traditionally, the financial and legal aspects of a M&A due diligence have been in focus. This means that the financial statements, assets, cash flows and contractual obligations are thoroughly examined, leaving the operational aspect underprioritized (Shaughnessy, 2009). Consequently, the neglection of operational insights signify that key knowledge about the operating model, strengths and weaknesses, and the cost structure are omitted as a knowledge determinant in the final acquisition decision. Such insights do not only contribute to the actual acquisition decision, but functions as input to the company valuation, a lever for price negotiations, and provide knowledge for the following integration and realization of improvement potentials (Herd, 2004). It is therefore suggested to put an equal emphasis on both the operational aspect and on the legal - and financial part of a due diligence (Morrison, 2008). As M&A deals become more comprehensive and wide ranging (Picker, 2016), so does the importance of understanding the fundamental drivers of the target company (Herd, 2004). In addition, uncertainty and complexity in supply chains, and hereby operations, are simultaneously increasing (Malik, 2011). This is seen in the complex distribution network, supplier relations, IT systems, etc. which contributes further to the importance of understanding the operational drivers, specifically within manufacturing firms where the flow of physical goods and increasing supplier dependencies create complexity. At the same time, M&A activity is the highest within the industrial sector such as manufacturing firms, compared to all other sectors (PwC, 2016). When considering these two elements, it becomes evident that the aspect of planning and effectively performing operational due diligence presents itself as a challenge even for the most experienced firms (Recardo, 2014). Therefore, the operational due diligence phase should be considered as crucial to validate the target’s performance, potentials and risks. This should be performed through data collection and analysis leading to comprehensive understanding of deal drivers and improvement opportunity (Cavazos 2007). The general nature of assessing and evaluating an acquisition target is a complex affair and unlike financial - and legal due diligences, there are no principles such as accounting or law to guide an operational due diligence (Grebey, 2012). Furthermore, it is suggested that a standardized, structured and tested approach increases the odds of a successful due diligence (Morrison, 2008). However, the topic of operational due diligence in M&As indicate a substantial research gap. This is reflected in the limited amount of qualitative and quantitative academic and non-academic publications on the subject. To accommodate, the increasing complexity and high industrial M&A activity, the purpose of this paper is to develop an operational due diligence framework which can be used to support acquisition decisions for acquirers and M&A advisors. This is done by identifying and structuring operational determinants, defined in this paper as operational factors that influence the acquirer’s decision to purchase a specific target company. Conclusively, this paper seeks to answer the following two research questions: RQ1: “What are the operational determinants influencing the acquisition decision for acquiring firms in the due diligence phase?” RQ2: “Which analyses should to be performed to clarify whether the operational determinants contribute positively, neutrally, or negatively to the acquisition decision?” This paper proposes an approach to structure the operational determinants identified through a structured literature review and uses empirical data through practitioner interviews and a survey to suggest a guiding framework to support performance of an operational due diligence. In this paper, Procurement & Sourcing, Production, Warehousing & Inventory and Transport & Logistics constitutes the organizational scope of an operations due diligence. Although a few researchers (Grebey 2012) considers the organizational scope to include Sales, Marketing and R&D, they are excluded in this paper to
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