Beyond due diligence

A. R. Samson-125


ACQUIRING an operating company involves the determination of its fair market value. This accounting approach is further affected by the buyer’s appetite and the seller’s desperation, especially when the business is swimming in red ink.

“Due diligence” is a process that determines the value of an asset, especially to the buyer. Aside from the usual accounting approach, there is the search for hidden risks, like inventory that is overvalued or booked assets belonging to the sellers of the company in a personal capacity. Should human resources also be considered in the valuation? What is the cost of early retirement for some?

Fair market value after due diligence can be a moving number, until the deal is sealed. And in the case of a listed company, the stock price tracks the possibilities, usually betting on a high number.

Are social mergers, like engagements and marriages, also subject to due diligence?

What can be more deserving of objective assessment than a lifetime union? Dynastic families with comparable net worth tend to move in the same circles and very early in the lives of their progeny, parents plan out mating arrangements. Also, individuals who spent childhoods together due to friendship of families have their built-in knowledge of possible mates and their rising (or falling) net worth.


Social distancing in the last year may have changed practices of courtship and even the celebration of matrimonial ties. But the vetting process for mating still applies.

In the new world of social media, old social barriers of socio-economic status have fallen, making entries and exits of once sacrosanct enclaves more porous. The new fortune-hunters, who are also technologically savvy, are no longer dance or even TV starlets. They can be chat mates, personal trainers (less influential in the pandemic), or party animals booked in a hotel for their own fireworks.

One school of thought ascribed to the liberally inclined consider the past almost irrelevant. Thus, an eligible lady in her late twenties, having no current spouse in the appropriate jurisdiction and even living with or without a love child from a previous relationship is accepted by the social liberal on an as-is-where-is basis, just like a previously owned vehicle. Hopefully, the maintenance cost too is manageable.

It is a presumption in this case that the current relationship is the beginning of a life together. It is Day One in the emotional calendar. Any entanglements of either party before the current relationship have already been disentangled, even if still a bit messy as when a former partner still sends text messages of concern — I still dream of you, Sweetie. These periodic interruptions are relegated to the dustbin of old affairs and treated like clothes that no longer fit and already set aside. Rule Number One: Do not read each other’s text messages.

The other school presents a more traditional approach, short of hiring a detective. The ultra-possessive mate wants to know every detail of past relationships, including the circumstances of previous encounters — what were you wearing after you took off your earrings? (I was wearing nothing but a smile.) A mature girl, now ready to settle down with an earnest suitor who offers marriage, may feel compelled to be totally honest with her new mate and tell him everything — this is a terrible decision that can only end in grief, mostly hers.

If she is very pretty, she may have enjoyed an active lifestyle before deciding to settle down with the wealthy suitor. Her single life may have involved short-term arrangements, featuring a much older partner — he liked me to wash his hair privately in a hotel suite in the afternoon. (He brought his own shampoo. We had room service.) Such sketchy narratives can only raise more questions — did you have cafe latte?

Requiring too much information of a partner constitutes undue diligence. Let her keep her secrets as their original intensities must surely have faded with time and been replaced by the more stable (and less fiery) situation.

Social mergers, especially those involving asymmetrical net worth, have also assumed a more corporate form with the prenuptial agreement which can dissolve the partnership under certain conditions — who gets what and how much. In both social and corporate cases, highly leveraged relationships with a high level of consumption and expenses can come down like a house of cards. And then the marriage vows click in: till debt do they part.

Tony Samson is Chairman and CEO, TOUCH xda


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