Archive for the ‘Due Diligence’ Category

Service of Due Diligence

Monday, December 13th, 2021


Image by aerngaoey from Pixabay 

It pays to ask questions or do a modicum of research which some marketers have learned the hard way. According to businessinsider.com, in the 1990s Yardley hadn’t asked actor Helena Bonham Carter about her makeup routine before they announced their relationship with her. After she publicly admitted she didn’t wear makeup and couldn’t fathom why they chose her, they cut their association that shouldn’t have happened in the first place.


Image by Hannah Wesolowski from Pixabay 

In 1989 PepsiCo staff needed only look at Madonna’s “Like a Prayer” music video to determine that it didn’t reflect the image they sought. Yet they paid her $5million to appear in benign commercials which included the then new song. “While the ad itself was PG,” reported Laura Stampler, “Madonna’s music video for the song in which she witnesses a rape and gyrates around a burning cross incited an explosion of controversy.” Would checking that have been so hard to do?

And what about recently? In the “Sex and the City” reboot, “And Just Like That…” on HBO Max that premiered last week, a main character, Mr. Big, dies after a 45 minute Peloton class on a Peloton stationary bike–a super product placement gone south. The company didn’t pay for the placement but knew their equipment was being used, reported Joseph Pisani and Megan Graham in The Wall Street Journal. It also approved a Peloton instructor, Jess King, appear in the segment.

Did anyone at Peloton ask enough questions or demand answers before playing ball? “While Peloton coordinated with HBO on the placement of one of its bikes, HBO didn’t disclose the plot in advance because of ‘confidentiality reasons,’ Peloton said.” Lesson learned to leave nothing to trust in future?

Peloton spokespeople put a good face on it. “’Mr. Big lived what many would call an extravagant lifestyle—including cocktails, cigars, and big steaks—and was at serious risk,’ said Dr. Suzanne Steinbaum, a cardiologist on Peloton’s health and wellness advisory council, in a statement from the company.” The reporters ended the article: “Peloton said there is some good news: ‘Riding his Peloton bike may have even helped delay his cardiac event,’ Dr. Steinbaum said.”

It’s not only in business we need to ask questions and insist on answers. The husband of a friend swallowed pills that killed him. He didn’t check the product insert and counted on his doctor to remember his health history that contraindicated the drug.

Are you good at asking questions? Do you know of other examples in which a well known company missed the boat due to lack of research? Are there any elements in our lives that we can leave to trust?


Image by Steve Buissinne from Pixabay 

Service of Too Big to Question

Monday, October 12th, 2015

 

Due diligence

In the news last week were at least two examples of people who should have known better. They conducted zero due diligence on activities of an individual or about a company for which they were about to pay dearly either because of the stellar background of the former or the size of the deal in the latter instance–or maybe because they were gullible [unlikely] or lazy. In all cases people were not doing their jobs.

Anupreeta Das and Jean Eaglesham’s Wall Street Journal story, “Harvard, Goldman, VC…Fugitive,” is about Iftikar Ahmed, known as “Ifty” to his friends. [Shifty is more appropriate.] They report that he “allegedly stole $65 million” from his partners at Oak Investment Partners. He “exploited the trust-based culture of the venture capital firm,” they wrote. According to the reporters, “Mr. Ahmed’s former colleagues at Norwalk, Conn.-based Oak found that he used doctored deal documents, phony exchange rates and fake invoices to siphon off millions of dollars into secret bank accounts, according to prosecutors and regulators. Oak made the discoveries only after Mr. Ahmed was arrested on insider-trading charges unrelated to his work at the firm.” Nobody knows where Ifty is these days–India they think.

The article describes the fascinating details and is worth a read. What got me was a trustsideline detail. Ifty’s wife was able to buy a Manhattan apartment for $8.5 million cash weeks after he was arrested! The intrusive financial raking that small fries must go through to buy a co-op is insulting, so clearly, this purchase must have taken place at a condo whose board members wear blinders. They aren’t the only board so equipped. Please read on.

Next, I was glued to The New York Times article, “A Deal That Still Haunts Hewlett-Packard” which you should also read. The allegations illustrate inconceivable neglect by a CEO and board of a publicly owned company. To describe their vetting process as “scrutiny light” is an exaggeration in the $11 billion purchase of a British company called Autonomy, covered by reporter James B. Stewart. Most people would do more research before purchasing a vacuum cleaner than HP’s chairman Léo Apotheker and the HP board did before buying a foreign software company.

wearing blindersAccording to Stewart, “Some consider the Autonomy acquisition to be the worst corporate deal ever. Just how bad is confirmed by the latest revelations from a shareholders’ suit over the deal: Mr. Apotheker didn’t even read the due diligence report on Autonomy that H.P. commissioned from KPMG, the giant accounting firm. Nor did Raymond J. Lane, the board chairman, or any other member of the board, according to a report prepared by the law firm Proskauer Rose, which was hired to represent H.P.’s independent directors.”

Stewart notes that the executive summary contained “numerous warnings.” But they didn’t read the executive summary either. [Stewart did–as well as the full report.] He wrote: “The executive summary stresses repeatedly that Autonomy stonewalled KPMG accountants, who were granted ‘access to very limited proprietary financial and tax information.'” The summary questioned the “claimed stellar revenue growth” and Autonomy’s “revenue recognition practices,” crucial backup information to justify such an expensive acquisition. 

In the first instance, does a “trust-based culture” have a place in today’s world? Were the Oak venture capital partners asleep at the switch, busy doing similar fiddles or simply blindsided?

Regarding the second example, I Googled “most expensive vacuum cleaners,” and saw one that cost $5,599.99. Would you pay that much based on a brochure claim that it was worth the money with no other information? Stewart wrote, “I’d say that for $11 billion, HP should have been able to see whatever it wanted.” Do you agree?

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