An acquisition looked exciting on paper. Walking away turned out to be the right decision.
Situation
An Indian manufacturer of railway wagons and engineering components was exploring the acquisition of an Italian company that owned proprietary technology in light-aircraft manufacturing — a broad agreement on valuation was already in place.
What was at stake
The technology was attractive, but the acquisition meant a significant investment in an entirely new industry. Early conversations with the target’s management raised commercial and operational concerns that deserved deeper scrutiny than deal momentum usually allows.
What we did
Rather than working towards completion, we challenged the assumptions behind the investment thesis.
- Evaluated the commercial rationale and acquisition structure
- Flagged concerns arising from early management interactions
- Coordinated legal, tax and commercial diligence through Alliott Global Alliance partners in Italy
- Reviewed the target’s financial position and operating performance in detail
- Helped management weigh the risks against the agreed valuation
- Advised against proceeding on the negotiated terms
Outcome
Diligence confirmed serious concerns about the financial health and sustainability of the target. Management called off the acquisition. The target’s condition subsequently deteriorated further, moving towards insolvency proceedings.
Why it matters
The value of diligence is not always in helping a transaction close. Sometimes the greatest value is helping management avoid a decision that would have destroyed capital, consumed years of attention and exposed the business to risk it never needed to carry.
