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Due Diligence

Your vendor just got acquired so now what?

Mar 15, 2017 by Branan Cooper

On March 13, 2017, as the East Coast of the US was awaiting the latest snowpocalypse or snowmageddon, really big news broke related to vendor management – D+H was acquired and will be merged with Misys.

How This Affects You

If you’re a vendor manager, particularly one who has been through this before, you know it’s time to break out the shovels – not to clear snow, but to dig into the due diligence

Important note – while I was at a prior institution, when D+H acquired another company, it led to some questions in our following exam about what we did and how we reacted.

Next Steps: What You Should Do & How You Should React

On the surface, sounds like great news - they got acquired, must be a good thing. Maybe so, but before you congratulate your contact at D+H (or any other acquisition announcement), be sure to look at your vendor management. Make sure you react first by doing these things:

  1. Refresh your due diligence. You knew everything about D+H from your last round of due diligence, everything checked out and it’s all well-documented. Well, what will it look like in the new ownership structure? Likely, it’s too soon to tell, but you should start thinking about due diligence on D+H, the private equity firm who acquired them and on MIsys who is announced in the merger plans

  2. Refresh your risk assessment. Just like with due diligence, you should start thinking about a risk assessment on D+H, the private equity firm who acquired them and on Misys. 

  3. If you have D+H rated as a critical vendor, you definitely need to update your business continuity plan. Involve experts both at your institution and, once they are at liberty to discuss, at D+H and the acquiring company.

  4. If you have D+H rated as a critical vendor, you also need to update your exit strategy. Again, involve experts both at your institution and the acquiring company.

Due Diligence Items to Do

Here's some examples of due diligence to do's now that this acquisition happened:

  • Think about and list out questions you’ll want to ask and when you can.

  • See if you can set up a time to speak with management.

  • Completely refresh your due diligence with the lens of what you need to know about the companies who are new to the relationship and what the resulting company may look like.

Risk Assessment Related Questions to Ask Yourself

Here's some questions related to your risk assessment to ask yourslef now that this acquisition happened:

  • How does it affect their financials and thus your financial risk assessment? 

  • What does it mean for the management team and will they have the right experience in place for the new company? 

  • Will they change strategic direction or exit some portion of the business?

All of these factors may influence your view of strategic or operational risk. 

Start Preparing These Now

Yes, March 13 is far too soon to have many or all of the answers but you should start preparing your questions and have a process for asking them.

Corporations change; ownership can change and so should your assessment of the risk they represent.

Take heart – it’s usually largely good news and for all of the right reasons, but you need to be prepared no matter what and, at the very least, you must refresh your due diligence, update your risk assessment, perfect your documentation and note it all for your next meeting with senior management.

Have fun shoveling!

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Branan Cooper

Written by Branan Cooper

Branan Cooper is the Chief Risk Officer at Venminder. Branan has nearly 30 years of experience in the financial services industry with a focus on the management of operational and regulatory processes and controls—most notably in the area of third party risk and operational compliance. Branan leads the Venminder delivery team as the third party risk management subject matter expert in residence. Branan also serves as an industry thought leader. He's a member of InfraGard and the Professional Risk Management Industry Association (PRMIA). And, he was selected in 2018 as an advisor to the Center for Financial Professionals (CEFPro) and board member for the Global Sourcing Resource Network (GSRN).

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