Due Diligence Can Be Risky
Also Andrew Left, sanctioned invoices, Bill Ackman and Rich Handler.
If you are a big oil company looking to get into the renewable energy business, how do you know what to do? How do you learn how to make renewable fuels and market them to consumers? One possible approach is pure introspection: Get all your existing oil engineers and executives in a room and say “think about renewables” until you have a renewables business. (Perhaps have them read the public literature on renewables businesses first.) I am sure that in some contexts this approach works — it’s probably how a lot of financial firms get into a lot of new businesses? — but it seems hard.
More realistically, you are going to be building on somebody else’s — some competitor’s — work. One way to do that is to buy the competitor: You call up a renewables company that seems good, you say “hey we would like to buy you at a premium,” they say “sure sounds great,” you hand them a wad of cash and now you have a renewables business.