"Self" Due Diligence Critical for Companies Involved in Mergers and Acquisitions, Says LexPRO Research
STAMFORD, Conn., Oct. 8, 2013 /PRNewswire/ -- Much due diligence typically goes into an M&A deal, yet an important element is often overlooked - In-depth background checks on key executives involved in the transaction.
"Often these deals get tripped up by firms not checking out their own executives beforehand," says Michael Levien, a founding partner with Chris Procopis of LexPRO Research, a high level due diligence and background investigations firm.
As companies prepare to be acquired, sold, merged, go public or raise capital, they should always do background checks on their own executives. A deal could hinge on what potential investors learn about your C-Level executives. And if it falls through, you may never know why because you never saw the report.
Chris Procopis explains that, "In the M&A due diligence process, a release isn't required to conduct background checks nor is there any obligation to share information in the reports. This is different from pre-employment checks where signed releases are required."
"It's better to check out your own executives so you'll know upfront what it will reveal and how best to handle it," Levein says. In addition, LexPRO recommends that companies in the M&A marketplace and/or seeking financing should:
- Ask if background checks are being conducted and on whom.
- If reports are being run, ask to see them.
- Ask for the opportunity to correct inaccuracies and explain any negative information.
"Background reports can contain errors so this is your chance to refute or augment the results and protect your reputation," Procopis adds. "A mistake could be as simple as someone else with the same name having negative information that mistakenly ends up in the report."
He cites the time a chief executive was trying to sell his company, and a background report was produced on several executives, including "John F. Jones" (not real name). But the deal was never completed and no reason was given. It turned out that "John Jones" was accused of sexual harassment, but he was not the executive in question. The background check company reported for the wrong John Jones.
LexPRO Research is a leading provider of domestic and international risk mitigation background checks, and business intelligence services to the corporate, financial and legal communities. For more information, call 203-921-1281 or visit www.LexPROResearch.com.