DUE DILIGENCE IN THE MERGERS AND ACQUISITIONS ACTIVITY

Today, the business climate contains many challenges generated by the increase in competition at a global level, challenges which can strengthen or destroy a business. Mergers and acquisitions have become a way of corporate life because corporations compete to provide shareholders with a better return on their investments as this is the factor upon which corporate valuations are typically based. Managers produce growth strategies that are often based on acquisitions or alliances. The purpose of the present paper is to analyze the factors that generate the success or failure of mergers and acquisitions focusing on the due diligence review and its importance. We analyze the legal provisions regarding mergers and aquisitions and the mergers operations typology as we believe that knowing very well the kinds of operations that can take place would help managers to develop successful plans. We were also interested in looking closer to the factors that can lead to the success or failure of mergers and aquisitions procedures. The specialised literature tries to prove that mergers and acquisitions are generated inmost cases by external factors and the changes that may occur in the performances of the environment stimulate some companies to look for corporate control. The major problem of all these theories, so present in literature is that they consider that there are no internal factors that could generate economic reactions or that these factors are much too fable to lead to the decision to take part into merger or acquisition activities. Or this is far from reality. In mergers and acquisitions, communication is vital. Both before and after the merger or acquisition, the company that is doing the take-over must make sure that there is set a good communication with shareholders, employees and management of the target company. Determining the potential for a prospective merger or acquisition to create shareholder value and then keeping the promises made to the shareholders is in today's uncertain economic climate more critical than ever. Therefore, we consider that the due diligence review in the mergers and acquisitions operations becomes vital and we try to identify the main steps to be taken in such a review. We conclude that the planning of the merger and acquisition activities and the use of due diligence reviews leads to the success or failure of the operation.