A survey of due diligence practices among Kenyan firms involved in corporate acquisitions, January, 2003 to march,2009

Abstract

This survey was carried out to determine the due diligence practices of Kenyan firms that have taken part in acquisitions. A self-administered questionnaire was sent to 40 firms sampled and follow-ups made by phone and email to ensure the maximum possible response rate. 15 firms responded, making the response rate 37.5%. Frequencies and percentages were mostly used to analyse the data as these were the most suitable for the type of information generated. The following areas were considered during this study: Strategic due diligence, human resource due diligence, operational due diligence, financial due diligence, legal due diligence and IT due diligence. In each of these areas, the questions were tailored toward finding out the critical factors examined by the acquiring firms as they carried out due diligence as well as the crucial areas that were missed out. Kenyan firms generally have good due diligence practices, especially in strategic due diligence. There are, however, areas that firms seem to have been glossing over and not examining fully during their due diligence. Two of these critical areas are human resource and IT where in some cases as few as 25% of the respondents said that they had examined these critical factors. Also, only 40% of the respondent firms had checked to ensure that cost-cutting measures undertaken by the target company in the period leading up to the acquisition were sustainable in the long run.