Mergers & Acquisitions

Resources: M&A Talk Podcast

At M&A Talk we bring you exclusive interviews with experts in business sales, valuations, mergers and acquisitions and more. We talk to the most experienced professionals in the industry to uncover their secrets.

M&A Operational Due Diligence with Vadim Tsysin

M&A Operational Due Diligence with Vadim Tsysin

Vadim M. Tsysin, CPA

Due Diligence

What is operational due diligence? If you’re selling a company and would like to know how the buyer will conduct due diligence and how to sail through the process with minimal problems, you will find this show helpful. We discuss the purpose of due diligence, how you should prepare, and what happens when issues are uncovered. Vadim Tsysin is a Managing Director with Alvarez & Marsal in Chicago, specializing in pre-investment due diligence, post-deal merger integration services, and M&A advising.

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Guest Profile

Vadim Tsysin is a Managing Director with Alvarez & Marsal Private Equity Performance Improvement Group in Chicago. With more than 20 years of transactional experience, he has executed 100+ transactions ranging in size from $1.2 million to $16 billion. Vadim has substantial cross-border deal experience with completed transactions in Brazil, Mexico, Russia, the United Kingdom, and Australia.

Mr. Tsysin has deep expertise in executing deals from a merger and integration perspective. His background includes extensive work with capital markets, analytics, strategy, operational due diligence, business development, and integration experience. He has worked primarily with private equity investors to quickly analyze key business drivers and recommend successful corporate strategies for organic growth, strategic acquisition, divestiture, and financing and cash management.

Prior to joining Alvarez & Marsal, Vadim spent six years with DeVry Education Group in Chicago, where he served as Head of M&A, Integration, and Capital Markets, directing corporate M&A-related activities. Before that, he worked on Wall Street at Bank of America Merrill Lynch as an investment banker focusing on corporate finance and capital markets advisory in the packaging industry, and he served as an M&A consultant in the post-merger integration practice of Deloitte Consulting LLP.

Mr. Tsysin earned a bachelor’s degree in accounting and finance from Roosevelt University and an MBA (with distinction) from the University of Michigan Ross School of Business. He has been a licensed CPA in Illinois since 1997.


Highlights

  • Private equity firms are primarily experts in financial engineering.
  • Commercial due diligence is a strategic review of the industry. Operational due diligence consists of a nuts and bolts review of the finer details of the target’s operations.
  • Pre-acquisition operational due diligence consists of three components:
    • Review of the data in the virtual data room
    • Creating operational agendas to discuss with management
    • Analyizing the data and validating the assumptions
  • No-go decisions usually occur due to a valuation gap. Approximately 5% to 8% of due diligence efforts result in a no-go decision in the middle market.
  • A critical component of operational due diligence is assessing the likelihood of executing on operational synergies.
  • The lower the ambiguity, the lower the risk and the higher the valuation. The number one thing sellers should do to prepare for due diligence is eliminate ambiguities.
  • There is a lot of ambiguity a buyer must face when conducting due diligence.

Topics Covered

  • Why do private equity firms outsource due diligence? [7:25]
  • Why have private equity firms gained more operational experience in recent years? [9:00]
  • What is operational due diligence (ODD) and how is it different than commercial due diligence (CDD)? [10:00]
  • What does operational due diligence usually consist of? [11:40]
  • How do you conduct due diligence in such a short period of time? [13:00]
  • Are nefarious intentions common by the seller? [16:00]
  • What does a typical due diligence team consist of? [17:55]
  • What other teams does the operational due diligence team communicate with? [21:40]
  • What is the relationship between operational and financial due diligence? [22:45]
  • What are the most common issues in working with multiple due diligence teams? [24:15]
  • What are financial adjustments? [26:50]
  • How is operational due diligence conducted? Do you spend most of your time in a data room or talking to people? [28:00]
  • How do you reach a consensus among such a large group of stakeholders? [30:20]
  • How often do you produce a green light, yellow light, or red light decision? How common is an ambiguous decision? [32:15]
  • What percentage of transactions are a no-go decision? [33:50]
  • How iterative is due diligence? [35:40]
  • What happens if you run out of time? [37:25]
  • What is the difference between preliminary and confirmatory due diligence? [39:30]
  • What impact can the outcome of due diligence have on valuation? [40:55]
  • What is the goal of operational due diligence? [43:10]
  • How do the financial and operational due diligence teams communicate with one another? [44:00]
  • How should sellers prepare for due diligence? [46:40]
  • How far in advance should problems be corrected? [53:30]
  • How does operational due diligence relate to integration? [55:20]
  • What is the key to conducting due diligence? [59:00]
  • What are some of the most common patterns you encounter? [1:01:00]
  • How often do you encounter unsolvable problems? [1:03:45]
  • How do you mitigate uncertainty? [1:05:00]
  • What impact can the outcome of diligence have on the reps and warranties? [1:05:45]
  • Is due diligence conducted differently with private vs. public companies [1:07:10]

Learn More

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