Customer Reviews

The AMA Handbook of Due Diligence

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Recently, I read a great book by William Crilly and Andrew Sherman called, The AMA Handbook of Due Diligence.

I have been involved in a number of transactions, both on the buy and sell side, and I like this book because it takes a very complicated and involved process and explains it in a way that is thorough, clear, and best of all, concise. This book focuses its attention on potential buyers, and can act as either a road map for the inexperienced acquirer, or a point of reinforcement for those who have experience in acquisition due diligence.

The process of performing due diligence on a targeted acquisition has two main parts, as I see them:

1. Analysis of the company itself. It is important to understand a company's financial statements (and whether they are truly representative), its current health, growth strategy, planned product expansion/improvements, and all other facets that are specific to the company.

2. Analysis of the industry in which the company operates. The book lays out very clearly the information that is necessary to understand where a specific company fits with regards to market share, barriers to growth, etc.

In order to effectively evaluate a company and its place in the industry, Crilly and Sherman note you must know:

· Where to look

· What to ask

· What tools to use

· Who to ask

· How to test premises/answers

· Who should ask

The process, the book explains, is just as much an art as it is a science. The "art" aspect of due diligence is the style and experience to know which questions to ask and how and when to ask them. The "science" comes in the form of preparation of comprehensive and customized checklists.

There is a section at the end of the book that includes these comprehensive checklists. They are very detailed and offer a great starting point for investigation of a potential transaction. From my experience I have a good general idea of what I am looking for in a company both in terms of profitability and competitive advantage, but also with regard to risk. However, these checklists provide an excellent foundation and, if utilized, can highlight the opportunity or red flags in a potential transaction. Buy the book just for the checklists.

Overall, a great, informative read.