The conference room was modest but very functional – a rarity these days!  The two teams had amassed on either side, cordial, eager to complete the deal.  We were there representing the buyer.  The teams were divided into “operations,” “finance,” and “IT.”  Everyone had six weeks to complete all the analysis, and land gracefully into closing.

My team’s job was to evaluate IT and Interactive.  That meant a thorough analysis of everything in technology, starting with a Strategic Review, Hardware Assessment, Software assessment, Services assessment, and Interactive Review – everything from on-line strategies, social, mobile, and web presence to e-commerce, integration, and application development.  A lot of work, but work we’ve done many times.  Work we’re very good at.

Then, an executive from the seller’s side smiled and asked a very simple question:

“What makes for a good IT due diligence?”

For a moment I was taken aback!  Scrambling for time as I collected my thoughts to respond, it struck me!

“A good due diligence is like the X-Files,” I said.  “A combination of ‘I Want to Believe,’ ‘The Truth is Out There,’ and ‘Trust No One!’”

It was my turn to smile.  And hope that this due diligence will not be like an x-files episode, and that we wouldn’t uncover any monsters. I hate monsters…

Since then, I had a bit more time to think my answer through.  I’m sticking to it, but I do want to elaborate.

First – “I Want to Believe!”  This is a classic problem with acquisitions.  People fall in love with the deal.  They want it.  They must have it.  They believe it is a good deal – facts be damned!  Experienced and successful acquirers know how to temper this, but even they sometimes fall to the siren of the deal.  So, our job is to very carefully draw the curtain back. Let them see all that’s there.  It may still be a good deal, but it becomes better when your eyes are wide open.

Second – “The Truth is Out There!”  The one thing you need to do is listen.  Better yet, shut up and listen!  People will tell you the truth.  In subtle (and not so subtle ways) people ultimately need to heard.  A successful due diligence is less about detective work and more about listening, observing, and checking off all your questions from your list.  And always, always have a list.

Finally – “Trust No One!”  No matter how charming, how outwardly capable, how accommodating, etc., etc. always trust two things and two things only:  The facts, and your instincts.  Especially in technology due diligence where all too frequently byers get starry-eyed with such romantic words like “ecosystem,” “scalability,” “cloud,” “virtualization,” “social,” “mobile,” and of course “extensible!” A pig still smells like a pig no matter how much lipstick, mascara, and perfume they’ve poured on it!  Don’t get caught kissing it, and no matter what, don’t buy it!

Now you’re ready!  Polish your magnifying lens, double-check your list, and get to work!