This month's newsletter covers a profitability area that rarely gets much attention, but can cost billions of dollars of losses. It has to do with the quality - or lack thereof - of the due diligence that must be performed before a company can make an acquisition. As happens with so many things in the business world, non-business, but business-related, distractions can get in the way of objectivity. You will see how wining and dining can impact the outcome.

I raised my hand and said, "If when your team returns home, all they do is rave about the restaurants, you know you've got a problem." I went on to explain the perils of "Wine & Dine Due Diligence," something that frequently occurs with overseas acquisitions.

Later, the CEO of an American multinational company thanked me for my comment. He described his experience with a due diligence team he had sent to examine a family-owned Australian company. When he arrived in Australia he, too, was wined and dined by the owners. During the dinner, the wife of the owner put an arm around the shoulder of the team leader, and said, "We love your people; they are like children to us." The American team leader beamed with pride.

"Right then, I knew we were in trouble," the CEO said. "I later held a private meeting in which I brought the team back to reality. I reminded them that their job was to develop a realistic picture of the potential acquisition, and make an objective recommendation."

On another occasion, during a briefing of an American multinational company executive in Ohio on conducting business in other countries, the executive mentioned something similar. He had been appointed vice president, international, with responsibility for operations in Latin America and Africa. Having just returned from a tour of operations on both continents, he was appalled at the disastrous acquisition decisions some of his predecessors had made. "It was," he said, "as if the minute they set foot on foreign soil they forgot all they had le arned."

There is something disorienting about trying to conduct business in a totally unfamiliar environment We are used to functioning in familiar surroundings with well-known points of reference that help guide our every day activities. When those surroundings and points of reference are missing, we tend to approach and do things differently. We act in a more tentative way because we don't know if what we normally do would produce the same results. We are unsure of ourselves, which affects our judgment. We are out of our comfort zone, and more likely to make mistakes.

Even the most experienced executives, whatever their field, be it management, production, operations, marketing, sales, finance, etc., have problems operating in unfamiliar environments. These people, experts in their specific fields, may be unprepared for the international business world. On the other hand, people who have been in international business for some time learn to deal with the unexpected, and to keep functioning at a normal level. They learn to identify patterns that equate to reference points, thus deal more comfortably with the unfamiliar environment.

Once we made the participants aware of these factors with a series of interactive exercises, the barriers started to come down. Later feedback from the corporation indicates that communication problems have decreased markedly, and performance continues to improve.

It takes international street smarts to not fall for the "Wine and Dine" acquisition seduction strategy.

An author and a guest speaker on subjects such as Sustainable Growth and Profitability, Innovation, and Global Market Success, he has addressed audiences of thousands of senior executives and business owners, in English and Spanish, in 21 different countries. To learn more, visit his websites at www.imcaonline.com and www.FreeProfitTips.com Contact information: mykwyn@aol.com or call (630) 420-2605.