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Investigating entrepreneurial opportunities: A practical guide for due diligence;
Technovation 21 (2001) 263–265 www.elsevier.com/locate/technovation
Book reviews Investigating entrepreneurial opportunities: A practical guide for due diligence Richard P. Green II and James J. Carroll; Sage Publications, Thousand Oaks CA. No UK price quoted, pp. 180, ISBN: 0 8039 5942 7. The target audience for Investigating Entrepreneurial Opportunities: A Practical Guide for Due Diligence is both the entrepreneur and the student of entrepreneurship who need ‘a practical, comprehensive guide to the critical due diligence process of determining whether or not to acquire a business’. The Authors aim to provide ‘a street-smart view of business start-ups and acquisitions that is grounded in general theory and transferable to all types of entrepreneurial endeavours’. Both are educators and experienced business people, having conducted many due diligence assignments for a range of commercial clients. The book is one of five in the Entrepreneurship and the Management of Growing Enterprises (EMGE) series edited by Jerome A. Katz from the Smurfit Center for Entrepreneurial Studies, Saint Louis University. This book is eminently readable with short but informative chapters that cover the essential steps that have to be taken by anyone considering acquiring a business. In the introduction, the reader is introduced to Hendrix Neimann who bought Automatic Door Specialists, Inc. in October 1989 and who, in less than two years, was facing bankruptcy. To illustrate the theory of due diligence the Authors use this example throughout the book, together with others from recent high profile, global company acquisition successes and failures and examples from small companies known to them. The first chapter, An Overview of Investigation, explains the process of due diligence and its purpose, i.e. ‘to develop information that allows one to make a reasonable estimate of the viability and future profitability of a business being considered for acquisition’. The chapter details the seven steps to be taken when acquiring a business, the first five of which constitute a due diligence investigation. It emphasises the massive amount of data likely to be collected as part of the process no matter what size of business is being considered and discusses ‘the general processes used to find, collect, collate and organise business data into information’. Some of this information, although completely and accurately prepared for purposes such as financial reporting and tax returns, can be misleading as supporting a due diligence investigation was not its original purpose. The PII: S 0 1 6 6 - 4 9 7 2 ( 0 0 ) 0 0 0 6 7 - 5
chapter covers: the risks of the entrepreneurial endeavour; the value of an entrepreneur being able to make informed decisions about the acquisition; suggested business plan formats and the targets of the due diligence process. The subsequent fifteen chapters each take an aspect of the process and explore it in more detail, most starting with an example of successful or unsuccessful practice to illustrate the topic. The student of entrepreneurship will find this book a valuable resource as it will go a long way to redressing any gaps in their understanding of due diligence despite being written from the US perspective. The Suggested Readings at the end of each chapter are all US authors but the underpinning theory and concepts are transferable and the checklists on pages 161–168 appear comprehensive. A business studies course based outside the USA could easily develop assignments or run tutorials based on this book requiring students to investigate the financial, taxation etc differences for purchasers of businesses in their own country. However the book will not have the same value for the entrepreneur—or at least not for one based outside of the USA. The Series Editor and the membership of the Advisory Board for EMGE are exclusively American and herein is the main criticism of this book. If it is being marketed elsewhere as a practical guide for would-be purchasers of a business then the financial information will not be appropriate. It is written from the US perspective quoting, for example, current legislation, tax procedures, helpful websites and Internal Revenue Service (IRS) publications for further information. For entrepreneurs based outside the USA further reading and investigation of the current legal and taxation situation in their own country would be necessary and time consuming. For example, the UK-based entrepreneur wishing to investigate the mechanics of purchasing a small business may find a ‘How to’ guide such as an updated version of the Daily Telegraph Guide How to Buy a Business (Farrell, 1989) more useful. If this is the first business they are considering buying and want quick and simple answers to basic questions such as Why buy? and Why is it for sale?, the advice delivered in seven chapters and A Business Buyers’ Checklist is rather less daunting than sixteen chapters containing inapplicable financial information and 13 Tasks to be Completed plus 114 Questions to be Answered During the Exercise of Due Diligence however comprehensive the latter two lists may be. Sadly it appears that the Daily Telegraph Guide is no
264
Book reviews / Technovation 21 (2001) 263–265
longer available and a quick trawl of UK-based online book retailers revealed a dearth of replacement material written for the UK market. This leaves the UK-based entrepreneur in a dilemma. Do they use an out-of-date book written for the UK market or an up-to-date book written for the US market? Both options leave them with the additional task of confirming the current legal and financial implications of acquiring a business in the UK. This book aims to be of practical use to both entrepreneurs and students of entrepreneurship. However, the small business and the education communities have different learning characteristics, i.e. the inhabitants of the former are more likely to be Activists/Pragmatists and the inhabitants of the latter are more likely to be Theorists/Reflectors. It is debatable whether one book is able to appeal to both audiences bearing in mind the different learning agendas and likely different learning styles. Whilst this book will be a useful tool to help students of entrepreneurship to understand both the theoretical and the practical aspects of due diligence, the same may not be true of entrepreneurs about to buy a business.
That said, the numerous, practical examples of Hendrix Nieman and his experiences with the acquisition of Automatic Door Specialists Inc. should help demonstrate the importance of thorough due diligence investigations prior to the purchase of any business. The Authors suggest that ‘Anyone who is considering acquiring or starting a business of any kind in the near or distant future can benefit from owning this book’. Persuading entrepreneurs to read the whole book might bring more benefits but will present a bigger challenge.
From control to drift: The dynamics of corporate information infrastructures Claudio U. Ciborra, Kristin Braa, Antonio Cordella, Bo Dahlbom, Angelo Failla, Ole Hanseth, Vidar Hepsø, Jan Ljungberg, Eric Monteiro and Kai A. Simon; Oxford University Press, 2000
ure (knowledge/capital intensive), IT infrastructures have a centralising aim and effect. Moreover, Weill and Broadbent offer ten Leadership Principles for optimal governance of an IT infrastructure. These principles include managing IT infrastructure in the same way as a financial portfolio, alignment of infrastructure and strategic objectives, and learning from implementation experiences. For the authors, this is all very laudable, but centralisation leads to reduced flexibility—the key component of the opportunities presented by IT infrastructures. Chapter 3 discusses globalisation in the context of risk and reflexive modernisation (Giddens, 1991; Beck, 1992). Of particular interest for corporations is the availability and sources of expertise and the expansion of contingent events and their effects (both within and without). Crucially, however, for the IT infrastructure debate is the link between globalisation and decreasing control (paradoxically, where more knowledge leads to less control). Ultimately, according to this thesis, IT infrastructures should be used for networking purposes, not control. Chapter 4 investigates the adoption of standards. These include equipment, applications and software and the way they interact (e.g. internet protocol and the world wide web). Chapter 5 presents the analytical framework of Actor-Network Theory. At the core of this approach for the authors is the concept of inscription (Akrich, 1992; Akrich and Latour, 1992). Inscription is the process by which designers import into their work perceptions about users and society in general in order to predetermine outputs if not outcomes. Consequently
What is an infrastructure, and how does an IT infrastructure compare with the more familiar infrastructures of modern society such as roads, telecommunications, schools, etc.? Indeed, is there not a paradox embedded in the question such that in the old economy, infrastructures provided order, control and operational mechanisms. These are precisely what the new economy—the information economy—is not about. Or is it? Moreover, according to the authors, it is not possible for the business community to shy away from these challenging questions. Whatever the enterprise, as the six case studies in this volume illustrate very clearly, these questions are going to become real issues in the very near future. Such is the value of this volume for all students of business, process, and organisational sociology. The first four substantive chapters provide the theoretical context to the case studies. Claudio U. Ciborra opens this section with a critical view of current literature. In particular he takes issue with Weill and Broadbent’s (Weill and Broadbent, 1998) thesis for its emphasis on alignment and control, their rhetorical approach to research, and the reliability of their data. On the issue of control, for example, the literature emphasises rational approaches to the selection, deployment and management (control) of IT infrastructures. Owing to their nat-
Rosie Boxer Brighton Business School, University of Brighton, Mithras House, Lewes Road, Brighton BN2 4AT, UK
Reference Farrell, P., 1989. The Daily Telegraph. How to Buy a Business, 2nd edition. Kogan Page, London.
Book reviews Investigating entrepreneurial opportunities: A practical guide for due diligence Richard P. Green II and James J. Carroll; Sage Publications, Thousand Oaks CA. No UK price quoted, pp. 180, ISBN: 0 8039 5942 7. The target audience for Investigating Entrepreneurial Opportunities: A Practical Guide for Due Diligence is both the entrepreneur and the student of entrepreneurship who need ‘a practical, comprehensive guide to the critical due diligence process of determining whether or not to acquire a business’. The Authors aim to provide ‘a street-smart view of business start-ups and acquisitions that is grounded in general theory and transferable to all types of entrepreneurial endeavours’. Both are educators and experienced business people, having conducted many due diligence assignments for a range of commercial clients. The book is one of five in the Entrepreneurship and the Management of Growing Enterprises (EMGE) series edited by Jerome A. Katz from the Smurfit Center for Entrepreneurial Studies, Saint Louis University. This book is eminently readable with short but informative chapters that cover the essential steps that have to be taken by anyone considering acquiring a business. In the introduction, the reader is introduced to Hendrix Neimann who bought Automatic Door Specialists, Inc. in October 1989 and who, in less than two years, was facing bankruptcy. To illustrate the theory of due diligence the Authors use this example throughout the book, together with others from recent high profile, global company acquisition successes and failures and examples from small companies known to them. The first chapter, An Overview of Investigation, explains the process of due diligence and its purpose, i.e. ‘to develop information that allows one to make a reasonable estimate of the viability and future profitability of a business being considered for acquisition’. The chapter details the seven steps to be taken when acquiring a business, the first five of which constitute a due diligence investigation. It emphasises the massive amount of data likely to be collected as part of the process no matter what size of business is being considered and discusses ‘the general processes used to find, collect, collate and organise business data into information’. Some of this information, although completely and accurately prepared for purposes such as financial reporting and tax returns, can be misleading as supporting a due diligence investigation was not its original purpose. The PII: S 0 1 6 6 - 4 9 7 2 ( 0 0 ) 0 0 0 6 7 - 5
chapter covers: the risks of the entrepreneurial endeavour; the value of an entrepreneur being able to make informed decisions about the acquisition; suggested business plan formats and the targets of the due diligence process. The subsequent fifteen chapters each take an aspect of the process and explore it in more detail, most starting with an example of successful or unsuccessful practice to illustrate the topic. The student of entrepreneurship will find this book a valuable resource as it will go a long way to redressing any gaps in their understanding of due diligence despite being written from the US perspective. The Suggested Readings at the end of each chapter are all US authors but the underpinning theory and concepts are transferable and the checklists on pages 161–168 appear comprehensive. A business studies course based outside the USA could easily develop assignments or run tutorials based on this book requiring students to investigate the financial, taxation etc differences for purchasers of businesses in their own country. However the book will not have the same value for the entrepreneur—or at least not for one based outside of the USA. The Series Editor and the membership of the Advisory Board for EMGE are exclusively American and herein is the main criticism of this book. If it is being marketed elsewhere as a practical guide for would-be purchasers of a business then the financial information will not be appropriate. It is written from the US perspective quoting, for example, current legislation, tax procedures, helpful websites and Internal Revenue Service (IRS) publications for further information. For entrepreneurs based outside the USA further reading and investigation of the current legal and taxation situation in their own country would be necessary and time consuming. For example, the UK-based entrepreneur wishing to investigate the mechanics of purchasing a small business may find a ‘How to’ guide such as an updated version of the Daily Telegraph Guide How to Buy a Business (Farrell, 1989) more useful. If this is the first business they are considering buying and want quick and simple answers to basic questions such as Why buy? and Why is it for sale?, the advice delivered in seven chapters and A Business Buyers’ Checklist is rather less daunting than sixteen chapters containing inapplicable financial information and 13 Tasks to be Completed plus 114 Questions to be Answered During the Exercise of Due Diligence however comprehensive the latter two lists may be. Sadly it appears that the Daily Telegraph Guide is no
264
Book reviews / Technovation 21 (2001) 263–265
longer available and a quick trawl of UK-based online book retailers revealed a dearth of replacement material written for the UK market. This leaves the UK-based entrepreneur in a dilemma. Do they use an out-of-date book written for the UK market or an up-to-date book written for the US market? Both options leave them with the additional task of confirming the current legal and financial implications of acquiring a business in the UK. This book aims to be of practical use to both entrepreneurs and students of entrepreneurship. However, the small business and the education communities have different learning characteristics, i.e. the inhabitants of the former are more likely to be Activists/Pragmatists and the inhabitants of the latter are more likely to be Theorists/Reflectors. It is debatable whether one book is able to appeal to both audiences bearing in mind the different learning agendas and likely different learning styles. Whilst this book will be a useful tool to help students of entrepreneurship to understand both the theoretical and the practical aspects of due diligence, the same may not be true of entrepreneurs about to buy a business.
That said, the numerous, practical examples of Hendrix Nieman and his experiences with the acquisition of Automatic Door Specialists Inc. should help demonstrate the importance of thorough due diligence investigations prior to the purchase of any business. The Authors suggest that ‘Anyone who is considering acquiring or starting a business of any kind in the near or distant future can benefit from owning this book’. Persuading entrepreneurs to read the whole book might bring more benefits but will present a bigger challenge.
From control to drift: The dynamics of corporate information infrastructures Claudio U. Ciborra, Kristin Braa, Antonio Cordella, Bo Dahlbom, Angelo Failla, Ole Hanseth, Vidar Hepsø, Jan Ljungberg, Eric Monteiro and Kai A. Simon; Oxford University Press, 2000
ure (knowledge/capital intensive), IT infrastructures have a centralising aim and effect. Moreover, Weill and Broadbent offer ten Leadership Principles for optimal governance of an IT infrastructure. These principles include managing IT infrastructure in the same way as a financial portfolio, alignment of infrastructure and strategic objectives, and learning from implementation experiences. For the authors, this is all very laudable, but centralisation leads to reduced flexibility—the key component of the opportunities presented by IT infrastructures. Chapter 3 discusses globalisation in the context of risk and reflexive modernisation (Giddens, 1991; Beck, 1992). Of particular interest for corporations is the availability and sources of expertise and the expansion of contingent events and their effects (both within and without). Crucially, however, for the IT infrastructure debate is the link between globalisation and decreasing control (paradoxically, where more knowledge leads to less control). Ultimately, according to this thesis, IT infrastructures should be used for networking purposes, not control. Chapter 4 investigates the adoption of standards. These include equipment, applications and software and the way they interact (e.g. internet protocol and the world wide web). Chapter 5 presents the analytical framework of Actor-Network Theory. At the core of this approach for the authors is the concept of inscription (Akrich, 1992; Akrich and Latour, 1992). Inscription is the process by which designers import into their work perceptions about users and society in general in order to predetermine outputs if not outcomes. Consequently
What is an infrastructure, and how does an IT infrastructure compare with the more familiar infrastructures of modern society such as roads, telecommunications, schools, etc.? Indeed, is there not a paradox embedded in the question such that in the old economy, infrastructures provided order, control and operational mechanisms. These are precisely what the new economy—the information economy—is not about. Or is it? Moreover, according to the authors, it is not possible for the business community to shy away from these challenging questions. Whatever the enterprise, as the six case studies in this volume illustrate very clearly, these questions are going to become real issues in the very near future. Such is the value of this volume for all students of business, process, and organisational sociology. The first four substantive chapters provide the theoretical context to the case studies. Claudio U. Ciborra opens this section with a critical view of current literature. In particular he takes issue with Weill and Broadbent’s (Weill and Broadbent, 1998) thesis for its emphasis on alignment and control, their rhetorical approach to research, and the reliability of their data. On the issue of control, for example, the literature emphasises rational approaches to the selection, deployment and management (control) of IT infrastructures. Owing to their nat-
Rosie Boxer Brighton Business School, University of Brighton, Mithras House, Lewes Road, Brighton BN2 4AT, UK
Reference Farrell, P., 1989. The Daily Telegraph. How to Buy a Business, 2nd edition. Kogan Page, London.