I've found that one of the most important, though often difficult, areas of diligence is assessing management's level of transparency. While this often becomes evident during the course of normal due diligence, I'm wondering if anyone has any deliberate techniques for assessing management transparency?
More on Searchfunder
Searchfunder is an online community and toolkit for searchfunds. Over 80% of those involved in searchfunds maintain a Searchfunder.com account to help them network, problem solve challenges, and keep up with the industry.
We maintain partnerships with database providers that make searching more effective, efficient and affordable along with features that help searchers find deals and investors and vice versa.
We maintain partnerships with database providers that make searching more effective, efficient and affordable along with features that help searchers find deals and investors and vice versa.
I have a ton of experience and I am still learning and still being surprised by what I learn. Three years ago we bought a company owned by two partners (65/35). I had gotten to know the guys and the company over a seven-year period. It took over a year from LOI to closing (various reasons, none germane) and we thought we knew them very well. About four months after closing I got a call from the 65% owner-partner saying he wanted to leave the company. He used as an excuse that his father was ill and dying. I offered a leave of absence or whatever he needed to get through his situation. He said he just wanted to leave. OK, I said. And then I called his partner to try to get some more background, but his partner had no idea and was just as surprised as I was. Of course, I was even more surprised that the guy hadn't even told his own partner. I learned soon after that these two guys could barely stand each other, which they disguised very well. I never had an inkling.
There's no substitute for constantly having your gold-plated BS detector on and running and trusting your gut. It's also helpful if you have one or more partners or people invested in the process and you constantly checking to confirm you are hearing the same things...or at least understanding what's different.
Bottom line: There are no magic bullets with assessing transparency or judgement. Good luck.