When deciding which type of due diligence to perform in a particular situation, what are some of the factors that should be taken into account? How can you determine whether a full-scope or targeted due diligence is appropriate for a given transaction or scenario, and what are the pros and cons of each approach?
I think it largely depends on the type/nature/scope of the transaction. For an asset acquisition, for instance, you are not taking on any liabilities of the company. Your DD would likely be scoped to focus on assessing the assets themselves. If you are doing a full acquisition and taking on all risk/liabilities of the company, then I definitely think a full DD process is required.
I would say it depends on what resources are available to complete a full detailed due diligence. If you can afford the risk on the other side of the deal, then it may not make a difference if you are spending money on advisors to identify how thorough the due diligence needs to be. One item that I would recommend is to spend some time on researching the culture of both companies and if it will lead to a successful merger. Is the “new” CEO going to support the culture and drive that change? Based on our material, I think understanding culture is just as important as the accounting and asset management. Pros of targeted Due Diligence is less cost. Cons would be more risk of what you don’t know what to expect. Not doing a thorough investigation could end up in a negative impact.