The phrase, of course, is “due diligence,” and it means (at least to this layman), the basic verification and research any fiduciary needs to perform before going ahead with a deal, especially a merger.
I’m not sure what the phrase would be in Russian, but my friend Steve Brill tells a wonderful story of why it’s so important.
There he was, owner of most of the legal newspapers in the world — American Lawyer is his flagship, but he owns lots of regional rags as well (e.g., The Recorder in San Francisco) — in Moscow, about to pay “six trillion rubles,” as he puts it (which is to say “12 cents,” give or take, in dollars) to buy the local legal paper and thereby, he hoped, wrap up what might become the thriving Moscow franchise for this sort of thing.
I mean, the deal had progressed to the point that he was actually in Moscow, had actually met at their offices several times, was actually getting ready to wire funds.
But in the course of the lawyers’ due diligence, it developed that the people from whom he was about to buy this paper did not own it.
No, and the reason they always met with him at the offices around 5PM was that by then the owners had gone home.
Haven’t we seen something like this on TV? Didn’t the Mission Impossible folks use this ploy a lot?
One of the sellers was a part-time employee of the firm, and so had access to the offices and knew how to talk the talk. The others weren’t even connected with it.
Due diligence. It’s boring, but fundamental. Just try getting 6 trillion rubles back from these guys once you’ve paid it out.
Tomorrow: My Own Little Russian Caper
Quote of the Day
Yap islanders ... use special kinds of stones as money. ... Some of them are too large to move, but everyone knows who owns them.~James S. Duesenberry (Money and Credit: Impact and Control)
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