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The investing thesis can probably be boiled down to: most companies are run as they say they are (honestly), a few companies are unknowingly run poorly (inaptit
by ethbr0 5y ago
The investing thesis can probably be boiled down to: most companies are run as they say they are (honestly), a few companies are unknowingly run poorly (inaptitude), and a very few are run fraudulently (wilfull deception).
The due diligence process is designed to ensure the last one is ferreted out.
If you believe you can find other signals to identify and avoid those companies, then why still conduct it (aka the most painful part of the process)?
Honest companies are not an issue, and inept companies can be recognized through a less disruptive audit.
- rrrrrrrrrrrryan 5y ago> The due diligence process is designed to ensure the last one is ferreted out. That's the stated purpose, yes, but the author implies the due diligence process is made to be intentionally painful and drawn-out to gain leverage over the acquisition target, and to dig up dirt in the company. At the end of the process, the new leverage and new dirt is used to try to aggressively re-negotiate the deal. Most companies don't cave to this, so most deals don't go through. Presumably, this guy short circuits the process by just low-balling right off the bat then moving on if they don't accept, which saves both parties time and money.