What Can Happen If a Due Diligence Is Not Conducted?

Companies that proceed with an acquisition without conducting thorough due diligence expose themselves to significant risks. A recent example is the case of Charlie Javice, as reported by The New York Times (source: https://www.nytimes.com/2023/01/21/business/jpmorgan-chase-charlie-javice-fraud.html). Within the framework of diligent digital due diligence, inconsistencies and fraudulent customer data would have been uncovered.

Charlie Javice, an entrepreneur in the education sector, managed to deceive JPMorgan Chase through fraudulent activities. JPMorgan was interested in acquiring Javice's company without conducting thorough digital due diligence. Had such an examination taken place, potential risks and irregularities would have been identified early on.

In the case of JPMorgan Chase, it was revealed that up to 93% of the customer data presented by Javice was falsified. However, this crucial information was only discovered after the completion of the acquisition. The consequences were devastating: JPMorgan Chase had to write off the entire acquisition and take further legal actions.

In addition to financial losses and a damaged reputation, companies can also face legal consequences. Identifying fraudulent practices, data breaches, or other compliance violations through digital due diligence is crucial to minimize the risk of such incidents.

The story of Charlie Javice and JPMorgan Chase clearly demonstrates the importance of thorough digital due diligence. Companies should not forgo the opportunity to uncover potential risks and irregularities in the target company's digital infrastructure and activities. A comprehensive examination of digital assets, including the authenticity of customer data, is critical to ensure the integrity of the acquisition and avoid potential negative impacts.