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Marry in haste, repent at leisure

The business case for merger might be strong, whether it is to create a full-service firm, plug gaps in service to key clients, increase expertise, expand the client base or achieve wider geographical coverage. There are, however, significant risks, the strategic aspects of which are the main focus of many firms. Frank Maher, partner at Legal Risk, however, argues that firms need to pay far more attention to the dangers of operational risk in negotiating and completing a merger.

7 December 2004

This article addresses some of the operational risk issues firms need to address in relation to undertaking mergers and acquisitions. The first critical requirement is to examine the target firm or team’s operational risk management. There are several reasons for this:

  • Post-merger integration may be delayed or damaged irreparably if the issues are only discovered later;
  • Indemnity-insurance issues may cripple the firm;
  • Failure to do so is at the heart of why many mergers fail to achieve their strategic objectives.

With the levels of press speculation that accompany any merger, and the pressure to minimise both firms’ exposure through uncertainty in the intervening period, it is understandable that some mergers are pushed through with a considerable, even indecent, degree of haste. But it is important to understand the extent to which the deal may be compromised by doing so.

Pre-merger due diligence on ri...

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