Intellectual Assets & Knowledge Due Diligence

Abstract

The ability of the acquirer and the acquired firm in managing new capabilities and skills following a transaction is considered to be one of the most important purchasing criteria in takeovers and mergers. Practitioners claim that M&A deals, which involve practices with strong knowledge management discipline, are better candidates for acquisition. Experience reveals that world-class organizations that are managing knowledge assets effectively increase innovation, accelerate speed to market, increase organizational competence, and improve productivity.

In M&A deals, companies go through a chain of activities: (1) crafting inorganic growth strategy; (2) screening market for acceptable growth opportunities; (3) targeting the candidates; (4) conducting due diligence investigations and post-acquisition integration planning; (5) allocating purchase price and negotiating; (6) signing and closing; and notably (7) implementing and finalizing post-merger integration.

In our contribution, we will provide insight on the importance of intellectual capital in inorganic growth. Among other due diligence investigations, we argue that knowledge management due diligence audit is supposed to explain the relationship between (1) intangible knowledge assets (including the related processes, technologies and organisational culture) and (2) inorganic business growth through mergers and acquisitions.

Keywords: Due Diligence, M&A, Knowledge, Intangible Assets, Organic Growth