Buying a company is a challenging, complex and perilous undertaking. In any business situation, there can be hidden problems that, if missed, can turn a deal into a nightmare.

Red Flagging is a program designed to ensure that nothing has been missed or overlooked in the due-diligence process. You gain the certainty and peace of mind that comes from knowing that all issues and critical factors have been thoroughly scrutinized. Red Flagging enables you to remove the nagging anxieties about "deal breaking" conditions that are hidden from view.

Why Live with Uncertainty?
Executives in the acquisition game should take an honest look at how well they analyze target companies. Ask yourself the questions: "Am I completely comfortable with our due-diligence process? Am I certain that we have thoroughly examined all aspects of a target's business? Have we talked with everyone who could shed light on potential problems areas?" If the answer to any of these is "no" or "maybe", then why live with the uncertainty.

Having the right information and ensuring that no critical "deal breakers" have been missed is vitally important in avoiding money-losing mistakes. There are very few problem areas that cannot be found if the right kind of due-diligence is done.

Where Can the Problems Lie?
A company's management will typically describe an optimistic view of the future that is centered on a series of assumptions about markets, competitors, customer needs, and other business factors. That optimism may very well prove to be an accurate prediction of the future. It is also possible, however, that their view of the future might be misguided, uninformed, naive, or purposely misleading. The important thing to understand is that any bad news that might exist will typically not be forthcoming from interviews with management. The only way to find problems is to look for them and, since they could be anywhere, you have to look everywhere.

Establishing a company's current and future viability is a difficult process and, in order to avoid negative surprises, you need to analyze key business factors very carefully. Any of the situations listed below can potentially spell disaster if they are not discovered and thoroughly understood before any acquisition is completed.

Customer dissatisfaction Changes in the competitive environment Shifts in the needs of the marketplace Disaffected personnel Quality control problems

Outmoded technologies Fading product lines Misguided expansion plans Hidden financial trends

What is the Red Flagging Process?
Red Flagging is a step-by-step analytical process that moves methodically through a company in a search for hidden problems and trends. You know what is good about a company when you call us. Our job is to scrutinize that company, notice what is good, and search for possible red flag conditions. Ultimately, our involvement can be the difference between a profitable decision and a costly blunder.

There isn't anything magic about what we do. Our methods are based on years of experience on Wall Street, scrutinizing companies and markets, trying to locate the winners and avoiding the losers.

Red Flagging is due-diligence by professionals. We scrutinize corporate documents looking for trends that hint at trouble. We interview the people who have the information that might unlock hidden problems and trends. They include senior management, sales people, factory supervisors, customers, industry analysts and consultants, editors of trade journals, competitors, suppliers and others.

Why Use Red Flagging?
Oftentimes, our clients simply do not have the time to complete a rigorous due-diligence process or use Red Flagging as a 2nd opinion to validate opinions already drawn. In other situations, the analysis of an acquisition or loan candidate might be in the hands of an executive who is inexperienced in due-diligence techniques and methods. Red Flagging can help you avoid drawing dangerously inaccurate conclusions because of incomplete data or misinterpretation of existing information.

Investors are often not the best people to conduct due-diligence interviews. In the early fact-finding stage, people within the target company see them as "an ominous presence". In the field, they are better off staying hidden from view since customers, suppliers and others can get nervous about an impending change of ownership.

An important aspect of Red Flagging is that it is "deal neutral" and provides an unbiased viewpoint on critical aspects of a company's business. It is easy to get caught up in the excitement of a deal that looks right, but our involvement ensures that you get an impartial opinion. We don't hesitate to recommend against a transaction.

It is important to be forward-looking in analyzing a company and to not assume that the future will go as well as the past. There are many things that can change within a company and its markets, which is more than enough justification for making sure that acquisition candidates are carefully and properly analyzed. The past is easy to figure out. It is the future that needs to be understood.

Why live with uncertainty. An investment in Red Flagging is a small price to pay to protect your investment dollars and ensure that potential problems are uncovered before an acquisition or loan is completed.

HOME