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How to Identify mergers and acquisitions fraud

By Rohan A T

In the corporate realm, mergers and acquisitions are a common occurrence and there are a plethora of facets that makes individual businesses to merge with each other or for a big and successful business organization to acquire a small business or one that is not running up to its true potential. There are a plethora of advantages for both mergers and acquisitions but at the same time, it is crucial to ensure that you have a clear about both of these before taking a business decision regarding this. The below mentioned points will help business leaders to identify fraud in mergers and acquisitions.

1. Do Employee Background Checks: When a merger of acquisition takes place, it is common that the employees of both the companies will continue to work for same company. So, if your business is gearing up for mergers or acquisitions, it is important to do a background check to avoid hiring any frauds. If you fail to do that, then there are high chances that a fraudulent employee from the other organization is now your headache as well. Checking for the employees background can also help you to identify their performance which will help you to have a clear idea regarding whom you should select to continue working for the company.

2. Double-checking the Books: If you are running a company that is aiming for mergers or acquisitions then one of the most important things to do is to check and even double-check the books of the other company. There are chances that the other company might have tinkered with their books and have tried to persuade your company for merging with them or even acquiring them by showing you the false accounts. So make sure that you do a complete checking of their books and understand their financial situation before going ahead with the merger or acquisition process.

3. Check for Layoffs: When it comes to mergers and acquisitions, it is important to crosscheck even the minutest details to ensure that everything foes according to the plan. If you find that there have been group layoffs in the other company before the merger or acquisition especially in the HR or accounting department, make sure that you go again into the exact reason and if possible, check the entire books and payroll structure of the other company before finalizing the merger or acquisition process.

4. Unexplained Increase in the Inventory: The unusual increase in the inventory prior to the merger or acquisition should also be one thing that should grab your attention because it can be a sign of fraudulent activities. So make sure that you pay attention to the inventory levels of the company as well before finalizing the entire merger and acquisition process.

Mergers as well as acquisitions are great ways for businesses to come together and grow together and reach for greater heights. If done properly, both of these can yield great results and these above-mentioned points will help you to understand some of the potholes when it comes to mergers and acquisitions and stay away from it.

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