Corporate marriages not made in heaven

MUMBAI: If you think mergers and acquisitions are all a number crunching game, think again. There's more to it. Firms are looking for finer details beyond financials.

And to look hard enough, they are hiring consultants (read, private detectives). The job: Sneak around for information crucial to clinching the deal.

Welcome to the world of forensic advisory business. Thanks to a rise in cross-border deals, consultancy firms are expanding their presence in the segment. Recently, an American private equity fund wanted to invest in a Delhi-based real estate developer. It hired a consultant to do a background check on the company.

Though the deal looked lucrative and perfect on the face of it, the transaction fell through as the consultant discovered that the realty developer was funded by a religious sect — which went against the fund's grain.

Says Pankaj Dhandaria, partner, transaction advisory services, Ernst & Young, "Private equity investors are the ones largely opting for this service. They want to know the background of a company, its promoters and the way business is conducted.

It is important to understand the business values of a company and how well would the management cope with ups and downs of the business." When it comes to outright acquisitions though, forensic consultants focus only on HR practices and cultural aspects.

Says Deepankar Sanwalka, head of forensic advisory, KPMG India, "We seek information from the market place, competitors, employees, dealers, suppliers and allied stakeholders." The business is turning out to be so lucrative that in India, KPMG has started to ramp up its division, to include ex-CBI and CID personnel.