The due diligence review (DDR) is a critical part of the travel agency acquisition process.
There are five key objectives:
1. Identify deal-breakers, which, if unresolved could preclude pursuing the transaction any further:
• Company personnel engaged with conflicting, outside interests
• Financial commitments – employment contracts, leases from previous acquisitions, liens, etc.
• Legal/Regulatory issues- lawsuits, client complaints
– Quality of work
– Questionable accounting
– Questionable expenditures
2. Verify representations received from the seller, such as key assumptions made about employees, compensation, systems, key statistics.
3. Obtain a more detailed understanding of the business:
• Types of clients
• Business mix
• Sources of revenue
4. Obtain information vital to negotiating the transaction:
• Salary and benefit information for employees
• Inventory of furniture and equipment
• Inventory of computer systems and software
5. Identify potential transition issue or areas of focus:
• Compensation and benefit issues
• Technical and workflow process issues
The DDR is designed to assist the Due Diligence Manager (DDM) in efficiently planning, executing, and reviewing the planned transaction. Following a standardized DDR is critical to the successful completion of the review and will ensure that:
• A consistent approach is used by all due diligence team (DDT),
• A standard output (format) is created for each DDR, and
• The duplication of information gathered or requested of the owners is eliminated.
The DDM is responsible for the overall planning and final review of all work and the development of the final report.
PHASE I: Meeting/conference call with Deal Owner, Acquisition Manager and DDM
• Communicate overall vision and strategy of the DDR.
• Share information that has already been obtained to eliminate the duplication of data- gathering efforts.
• Identify DDT members.
Reporting: Recap the discussion/decisions and provide a copy to each party.
PHASE II: Meeting/conference call with Acquisition Leader, DDM and DDT Members
• Share new information.
• Review the need for confidentiality with acquired firm contacts and external sources (i.e., media).
PHRASE III: Meeting with DDM and Firm Owner and/or Main Contact
• Review the DDR.
• Provide the list of items that the firm will need to produce.
Reporting: The DDM will complete the recap of each call.
PHRASE IV: Data gathering process begins with the DDM, Team Members, and Firm Owner & Contacts
• Complete the due diligence data gathering (DDM, Firm owner/firm department contact).
• Complete the “Summary Report” memo (support team member).
PHRASE V: The DDM completes the Final Report and provides it to the Deal Owner and Acquisition Leader.