IDENTIFYING VALUE WITH OPERATIONAL DUE DILIGENCE The competition for the successful acquisitions is growing more intense every year as the amount of capital available for acquisitions is at its all-time high while PE firms at the same time are becoming increasingly more competitive. The stakes are also higher than ever as the deal value has almost doubled to EUR 103.2bn across 1,084 deals since 2016 in the Nordics alone1. Many leading PE firms are therefore increasing their focus on a fast and reliable way to gain the most value from their acquisitions from the operational side of the acquisition targets. Legal, financial and commercial due diligence assessments are already a given, but front runners are realising that there can be major value in also looking more in-depth within the target company rather than only at the theoretical market development surrounding the target. We find that leading PEs have consequently begun to asses all accessible operational activities prior to making an offer. WHY ASSESS OPERATIONS PRIOR TO A DEAL? In the current increasingly competitive markets with an overflow of capital, PEs have realised the benefits of being able to test some of the hypotheses originating from the other due diligence processes and to identify synergies that are out of scope in any other due diligence process. An operational due diligence is in other words not a stand-alone process but rather a critical supplement to both the financial and commercial due diligences. The commercial due diligence has an outward-oriented perspective towards the market and any related threats and opportunities there, whereas the financial due diligence is focused on the financial results of the company. However, the financial results do not reveal in themselves whether they could in fact be even better, or if they are as good as it gets, i.e. all company processes are already optimised to the extent possible. 1MergerMarket Nordics M&A activity during Q1-Q4 2017 p. 2 3
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