Due Diligence for Global Deal Making The Definitive Guide to Cross-Border Mergers and Acquisitions, Joint Ventures, Financings, and Strategic Alliances

by Rosenbloom, Arthur H.

• ISBN13: 9781576600924
• ISBN10: 1576600920
• Edition: 1st
• Format: Hardcover
• Copyright: 2002-09-01
• Publisher: Bloomberg Press

Summary

This new book is an invaluable guidebook for companies trying to capitalize on the opportunities in both developed and emerging cross-border markets. Noted experts discuss critical topics corporate executives--and all those involved with their company's legal, accounting, and tax matters--need to know to successfully complete complex, global transactions.

Author Biography

Arthur Rosenbloom is managing director of CFC Capital Corp. and former chairman of the board of Patricof & Co. Capital Corp. His contributions on investment banking-related topics have appeared in Forbes, BusinessWeek, the Harvard Business Review, and the National Law Journal. An adjunct professor of finance at the Stern Graduate School of Business at New York University and NYU Law School, he also is a trustee of New York's Citizens Budget Commission, a member of its Competitiveness Subcommittee, and an active member of the panel of arbitrators of the American Arbitration Association and the New York Stock Exchange.

Table of Contents

About the Contributors	xiv
Due Diligence in the Global Economy	1	(12)
Arthur H. Rosenbloom
What Is Due Diligence?	3	(1)
Types of Due Diligence	4	(1)
Who Is Involved in Due Diligence?	4	(2)
What Constitutes Legal Due Diligence?	6	(1)
What Constitutes Financial Due Diligence?	7	(2)
What Constitutes Operational Due Diligence?	9	(2)
Integrating Due Diligence Efforts	11	(2)
Strategic Due Diligence	13	(38)
Geoff Cullinan
Tom Holland
Strategy Precedes Due Diligence	14	(1)
Reviewing Your Strategy	15	(3)
Costs	15	(1)
Customers	16	(1)
Competitors	16	(1)
Capabilities	17	(1)
Achieving Value	18	(4)
Factoring in Cross-Border Complexities	22	(1)
Identifying Your Strategic Rationale	23	(5)
Active Investing	23	(1)
Scale	24	(1)
Adjacency	24	(1)
Scope	25	(1)
Transformation	25	(3)
Undertaking Thorough Due Diligence	28	(7)
Market Definition	29	(1)
Industry Dynamics and Trends	29	(2)
Competitor Market Map	31	(1)
Competitor Dynamics	31	(1)
Competitor Benchmarking	31	(1)
Customer Analysis, Input Costs, and Price Elasticity	32	(1)
Growth Opportunities	33	(2)
Cross-Border Complications	35	(1)
Key Factors in Evaluating Strategic Rationales	36	(1)
Due Diligence for Scale-Driven Transactions	37	(4)
Due Diligence for Adjacency-Driven Transactions	41	(2)
Due Diligence for Scope-Driven Transactions	43	(1)
Due Diligence for Transformation-Driven Transactions	44	(1)
Assessing Your Findings	45	(6)
Checklist: Cross-Border Strategic Due Diligence	48	(3)
Operational Due Diligence	51	(50)
Linda D. Arrington
Nelson M. Fraiman
Carolyn E.C. Paris
Michael L. Pinedo
Operational Due Diligence in the Cross-Border Context	52	(1)
Designing Due Diligence from a Strategic Perspective	53	(1)
Validating and Integrating Other Due Diligence Efforts	54	(3)
Serving as the Foundation for the Integration Plan	55	(1)
Serving in Support of Deal Strategy and Pricing	55	(2)
What Should Operational Due Diligence Cover?	57	(1)
Mapping the Value-Creation Process	58	(5)
Products and Services, Market Positioning and Brand, Sales and Distribution, and Customers	58	(3)
Manufacturing or Other Production of Goods/Services	61	(1)
Procurement of Supplies and Supply-Chain Management: Possible Related Reconfiguration of Distribution Processes, External Infrastructure Requirements, and System Cash Needs	62	(1)
Systems and Know-How Support of the Value-Creation Process	63	(2)
People, Training, and Corporate Culture	65	(3)
What Can Go Wrong	68	(4)
Deals That Got It Right	72	(29)
Checklist: Cross-Border Operational Due Diligence	75	(26)
Financial and Accounting Due Diligence	101	(48)
Jorge M. Diaz
Addressing All Aspects---Whether Large or Small	103	(1)
Financial Due Diligence Procedures	104	(10)
How to Verify the Numbers	106	(3)
Inbound Transactions	109	(1)
Outbound Transactions in Developed Countries	110	(3)
Outbound Transactions in Emerging Markets	113	(1)
Accounting Due Diligence Procedures	114	(35)
Integrity and Qualifications of Company Personnel, Their Practices, and Ethical Standards	119	(1)
Relationship with Independent Certified Public Accountants	120	(2)
Considerations in Evaluating Key Accounting Issues	122	(5)
Statutory, Regulatory, and Legal Requirements	127	(1)
Industry Accepted and Generally Accepted Accounting Principles	128	(1)
Industry Practices	129	(1)
Income Tax Laws and Regulations	130	(1)
Data Processing Systems	131	(1)
Political Environment in the Target's Country	132	(2)
Checklist: Cross-Border Financial and Accounting Due Diligence	134	(15)
Legal Due Diligence	149	(60)
Norman J. Resnicow
Clifford A. Rathkopf
``Legalese'' across Borders	150	(1)
The Purpose of Legal Due Diligence: Insurance against the Unknown	151	(1)
A Good Deal Is Vastly Better Than a Good Lawsuit	152	(2)
Defensive Due Diligence in U.S. Public Securities Issuance Transactions: Proving Enough Was Done	154	(1)
Forces Working to Limit Due Diligence: Quick Decision Makers versus Slow Scriveners	155	(2)
Avoiding Ruffled Feathers and Missed Opportunities	157	(1)
Fitting Due Diligence into the Structure and Timing of the Deal: Sooner Is Better	158	(2)
Organizing and Executing Legal Due Diligence: The Buck Stops at the Top	160	(9)
Assigning Qualified Personnel	160	(4)
Organizing and Delegating Duties	164	(1)
Ensuring a Searching Investigation	165	(2)
Communicating Results Effectively	167	(2)
Certain Key Risk Exposure Areas in Legal Due Diligence	169	(21)
Environmental	169	(4)
Antitrust	173	(4)
Intellectual Property	177	(5)
National Security Implications	182	(1)
Litigation	183	(3)
Security Interests of Creditors	186	(2)
Terminating Employment and Marketing Relationships without Liability	188	(2)
The Preferred Result of Legal Due Diligence: No News Is Good News	190	(19)
Checklist: Cross-Border Legal Due Diligence	191	(18)
Tax Due Diligence	209	(44)
Robert T. Bossart
Compliance versus Planning	209	(1)
Due Diligence Coordination	210	(1)
Local, National, and International Perspective	211	(1)
A Word about Joint Ventures	211	(1)
Taxable Purchase of Assets	212	(20)
Understanding the Target's Operations and Structure	212	(4)
International Federal Tax Compliance Due Diligence	216	(4)
Foreign Subsidiary Shares as Part of the Target's Assets	220	(2)
Transfer Pricing	222	(2)
Nonfederal Tax Due Diligence in an Asset Acquisition	224	(5)
Asset Acquisition Planning Opportunities: Overview	229	(3)
Taxable Share Purchases	232	(7)
Tax Compliance	233	(1)
Transactions and Tax Reserves	233	(2)
Consolidated Returns, Attributes, and Accounting Methods	235	(1)
Withholding Taxes	235	(1)
Employee Benefits	236	(1)
Foreign Tax Credits and Exemptions	237	(1)
Tax Attributes	238	(1)
Structuring the Share Acquisition	238	(1)
Tax-Free Exchanges	239	(14)
Checklist: Cross-Border Tax Due Diligence	241	(12)
People and Organizational Due Diligence	253	(50)
Cynthia N. Wood
Richard C. Porter
General Considerations	254	(5)
Strategic Objectives	254	(1)
Type of Deal	255	(1)
Composition of the Organizational Due Diligence Team	256	(1)
Impact of Organizational Experience and Cultural Milieu	257	(1)
Negotiations	258	(1)
Key Components of Organizational Due Diligence	259	(44)
Organizational Performance Measures	259	(2)
Cultural Factors	261	(4)
Mission, Vision, and Values	265	(2)
Communications Patterns and Processes	267	(3)
People Issues	270	(5)
Overall Organizational Structure	275	(3)
Functional Areas	278	(17)
Checklist: Cross-Border Organizational Due Diligence Process	295	(8)
Due Diligence Investigative Technology and Know-How	303	(20)
James B. Mintz
How Investors Use Private Investigators	303	(1)
How Investigative Technology Can Help	304	(3)
The International Public Record	304	(1)
The Hometown Newspaper	305	(2)
The Backgrounds of Key Executives	307	(4)
Prime Questions Investigators Must Explore	307	(4)
Resolution through Follow-up Investigation	311	(1)
The Business Practices of the Target Company	311	(7)
Regulatory Issues	312	(3)
Concerns about Intellectual Property	315	(1)
Business Disputes	316	(2)
Increased Pressure on Due Diligence Professionals	318	(5)
Checklist: Due Diligence Investigative Technology and Know-How	320	(3)
Appendix: Cross-Border Due Diligence in an Age of International Terrorism	323	(10)
Index	333