ThinkSet Podcast: The Evolving Nature of Due Diligence

May 28, 2020

Jennifer Mannino discusses her background in investigations and how advancement in technology has affected the way she conducts business. She describes articles she has authored on due diligence and compares past, present, and future capabilities in investigations.


EN 00:07 [music] Welcome to BRG’s ThinkSet podcast. I’m your host, Eddie Newland. BRG is a global consulting firm that helps leading organizations advance in three key areas: disputes and investigations, corporate finance, and strategy and operations. Headquartered in California with offices around the world, we are an integrated group of experts, industry leaders, academics, data scientists, and professionals working beyond borders and disciplines. We harness our collective expertise to deliver the inspired insights and practical strategies our clients need to stay ahead of what’s next. For more information, please visit

On today’s podcast, we’ll speak with BRG Managing Director Jennifer Mannino. Jennifer is part of BRG’s Transaction Advisory practice. She specializes in intelligence gathering and investigative strategy, overseeing integrity due diligence background checks for alternative investment transactions. She is also an expert in regulated industries. Jennifer audits organizational background check procedures and consults clients and methodologies to validate business relationships and beneficial ownership. Her insights have been published in national and local financial and legal publications. Today, we’ll discuss the evolving nature of due-diligence background checks and how technologies become an outsize part of the work she does with clients.

And with that, let’s get started. Jennifer, could you start by telling us a little bit about you and how you came to be BRG?

JM 01:44 We joined BRG earlier this year. We’re career investigators by trade. And there were several elements that we were looking for in joining a new organization. From a personal perspective, having been in the industry for 20-plus years doing investigations and background checks, a people-first environment was critical, especially as you’re developing a new team. Anyone who’s looking to work for an organization that is in a flux market today, this week, this month, this year, we’re experiencing all the nuances involved with a pandemic, which is a first for us. It’s very impressive to be part of an organization that considers its people, its clients. We’re driving our business and our culture with a very client-centric, people-centric, talent-centric mentality.

EN 02:40 You said that you’ve been doing this for 20 years. You’re a career investigator. Where did you start your career in investigations and how has it evolved to now?

JM 02:49 Yeah. I fell into the industry over 20 years ago. I started in the litigation world, and it’s been an interesting journey moving from litigation to private equity deals or more transactional work, supporting hedge-fund investments, and then transferring over to hedge-fund fraud. It’s been a nice cycle of investigative experience, if you will. And I was fortunate to have entered the industry at a time when the internet wasn’t as prevalent and Google was not this great tool of knowledge. But going back into that methodology, which we often defer to, which is where does the actual paper trail lead? That’s, I think, something I’ve carried forward. And in teaching not only clients but talent and just the market and the industry, when we talk about investigations I always like to bring up the nuance of this paper trail or record trail, if you will, that’s not electronic because there’s a combination of both when you’re doing this type of work in investigations.

EN 03:56 Where would you say the inflection point was where people started relying on Google to do a lot of what was traditionally done on paper?

JM 04:04 I mean, I think with any new tool everyone’s curious. We were curious. We’re still curious. Obviously, we use the internet and Google within our tool set ourselves. But when anything new comes out, I think everyone just needs and has the opportunity to test the type of data that comes from it. Our clients have a more sophisticated need. So if they’re not investing, they’re litigating. And if they’re not litigating, they’re refreshing or screening. And so they don’t have a reliance on Google. And I’m just going to use Google as the go-to source because it is the more popular of resources, but it’s inevitable. I mean, we use proprietary databases. We go to the local court. We go to the government agencies. We take a host of litigation approaches even when we’re doing these check-the-box background checks for investors. But having a source like Google, I think it just challenges the market too, right? I mean, it makes us better investigators because we know that our clients are becoming more sophisticated with knowledge. We’re checking these resources as well. We need to see what they see, and we actually teach them on how to use these tools better and smarter so they’re not wasting their time. But certainly, this kind of tool or the internet in general hasn’t replaced the need of using teams like ours for background investigations. But like anything else, we need to know what’s out there. We need to use it as well. We need to get smarter about how we access data, real data, true data, and access it under a permissible basis.

EN 05:49 Now, you’ve written articles in the past under the headline, “Due diligence gets personal.” What do you mean by that and how does that tie into everything?

JM 05:57 The headline itself was kind of the result of a family joke, which is when my sister and my sister-in-laws dated, and hopefully, you don’t hear this podcast, but I would background check all the individuals they dated. And so initially, that’s where the title came from, “Due diligence gets personal.” However, we dug into the story line of situations where we would work on investment deals. And oftentimes, it’s not the information of criminal convictions or stories, which we still see today. We’re still seeing principals come forward trying to sell their companies that have had either historical unethical business practices or we had one scenario where an individual had been released from prison after serving a 20-year murder sentence. Those are the more extreme cases. On a personal level, we see credentials being fabricated. We see add-on acquisitions, these mom-and-pop shops, are a catalyst to our market. And, of course, small business is very important to industry. But we’re seeing a lot of conflicts of interest and some strategic accounting practices that aren’t as evident to a basic due diligence accounting as it is when you’re forensically investigating an individual or a small business.

EN 07:21 Now you’re talking about the different clients that you had, private equity being one, and I know the deal size for private equity you can go from relatively small business that you buy for 5 to 10 million dollars to as large as it gets, billions of dollars. When you’re doing these investigations, intuitively, I would think that the larger deals would be much more complex in a lot of ways, but the way you spoke about the mom-and-pop shops there made me think that maybe they have their own struggles or difficulties that are unique, that they’ve run their own books. They might not do it in a GAAP-appropriate way or traditional accounting policies. Are there any stories from working with the mom-and-pops of how things getting personal, in particular, can really affect a deal?

JM 08:05 Yes. I mean, if someone’s looking to affect the finances to their advantage, of course that’ll happen at all levels, right? We see it in the large corporates. Certainly, we see a middle market and in smaller organizations. But yes, the trending that we’re observing is in the smaller businesses, especially in the last, I would say, five to seven years. There’s a lot of vulnerability in acquiring companies where the very owners and operators also hold the controller or CFO hat. There’s definitely more scrutiny there, more time from our investor clients being spent to figure out and sort through the data. And certainly, it’s where we see certain gaps where we try to support our clients from a behavioral perspective. And I use the word behavioral loosely. The investigations we do, we like to make the distinction that we’re handling the qualitative side where we have financial due diligence teams handling the accounting side. But being in an organization like BRG where we have cross-synergistic practices, when we’re working on deals together, we have the opportunity to sit down and observe each other’s findings and observe the market trends, share that knowledge with our clients, and be able to problem-solve based on both the qualitative and quantitative output based on our due diligence investigations.

EN 09:37 To break those two things apart, because I think that’s really interesting, the two pieces of the investigation, when you’re looking at both quantitative, which I imagine is the different data sets that you can go to in perhaps people’s books and other inventories, and then the qualitative, what’s an example or a couple examples of qualitative evidence and quantitative evidence that might not be the obvious ones that I would think of when I think of those words?

JM 10:01 I can think of a scenario recently where typically, in a background investigation, you’re looking into the reputational history of the company and its principles and its owners. In this instance, we were able to find litigation that was recent, and there were certain allegations there on a prior business transaction. Then the allegations were against the target company that our client was investing into. And so as a result, in talking to our financial due diligence team, we had the opportunity to regroup on the findings, understand what structure or tax structure was being put in place for our client’s deal, and then we were able to go to our client and discuss our findings both from the tax structure side and the reputational due diligence side. And it ended up resulting in a change in tax structure. It’s a minor detail that’s created a whole restructured event, which protected our client at the end. These kind of findings and these kinds of synergies within organizations are critical. That’s why we love being part of a group where we’re not accountants. We don’t represent to be accountants. Again, we’re investigators doing background checks. But having the opportunity to sit down with our financial experts and then being able to go to a client and say, “Look, these are the circumstances. Here are some of your options” – that’s something that we pride ourselves on. We don’t just stick to the qualitative piece. We’re interested in knowing what’s happening on the financial due diligence side and coming together and figuring out how do we create a better solution for our investor client.

EN 11:48 So that is what BRG’s capable of in 2020. Is that something that was around – that people were able to put together both those skill sets – say, 15, 20 years ago when you were getting into the business? How has that changed?

JM 12:02 Well, interestingly, what we do has evolved into a commodity, right? A commoditized product of the marketplace. I don’t think what companies realize is you’re paying the same price points to get this level of expertise, right? And it’s been a difficult conversation. I think when clients see the benefit of working with an organization that offers all these elements, it’s an easier conversation. We try to lead with examples so clients understand that we know their business. We try to figure out what’s the best strategy. And once they realize that working with an organization where there’s this cross-function of information or cross-sharing of information and the value it brings to the table at the same price points that you’re paying these commoditized providers, I think that becomes an enlightening experience. But again, until you’re interacting with your client and you’re exchanging emails at midnight and we’re equally stressed for their deal as they’re stressed for their deals, I think it becomes more of this bonding relationship when we’re working through these scenarios. And, of course, that’s evolved over time. I mean, certainly, there’s great organizations out there offering just background checks. Having been in the industry for over 20 years, those cross-functional teams are critical. You just can’t work in silos any longer, and you can’t offer any product for that matter, especially in the due-diligence phase, as a silo product. It doesn’t make sense for the client, and it doesn’t make sense for the market.

EN 13:39 So what are the biggest resistance to change? I know with any industry, as things evolve some folks just have the way that they’ve always done it. Is that the normal objection that you get from clients over time, “Well, why am I doing this?” Even though the price hasn’t changed, they don’t quite appreciate the extra levels that you can bring to the table?

JM 13:58 We’re seeing less and less of that. Again, I think as clients are using new tools – the internet, of course, has been around forever – but there’s certainly new tools coming up in environments like the deep web. I think the change is more a psychological change. They don’t know what they don’t know. And they like working with certain individuals, and that’s just natural. I mean, I hope that the clients we work with will never leave us because they feel they have the trust in us and the rapport and relationship where they would never experiment with anyone else, although we encourage them. Benchmarking is important in this industry, and everyone should be inviting new consultants to the table. And I think it just makes us consultants better, right? Because if the market gets complacent, then we get complacent, and we just don’t want to be in that position. I find that change is a bit easier. And when change is harder, it’s really because there’s a relationship there, and we value that. And, again, I hope our clients feel the same way and they would stay with us because of relationship. But certainly, it won’t be a complacency or status quo situation because it’s a competitive market. The rules are changing. Regulations are changing. Compliance is changing. Privacy rules are changing. And we want to be one of the leaders in the industry known to be ahead of these business practices.

EN 15:27 In the course of one of your due diligence investigations, you found out somebody had actually served 20 years in prison. What percentage of what you find in these investigations turns out to be criminal acts, and even if it’s, say, a “minor” criminal act, how do those lower-level findings make their way through a larger deal and affect it?

JM 15:46 From the restructuring side, these events combined with the financial due diligence, of course, creates these changes in terms, right? As far as the criminality goes, a material criminal event or any material information, it could be non-criminal, we see these events or reputational issues, I would say, 30% of the time. And that would be, again, a material event where there wasn’t transparency at the outset by the target subjects or the principals. It’s new information to our client, and they have to reassess the deal terms and how this affects the greater goal of keeping this personnel or this leadership in place to grow this new platform that our clients are acquiring. But on a broader scale, I would say 50% of the time we’re finding material information that changes the deal structure. And, again, it doesn’t have to be criminal in nature, but representations and transparency are so key when individuals are selling their businesses. Our investors are looking to essentially marry the company they’re acquiring and helping that leadership team grow the business. So we’re seeing more about the lack of transparency and some surprise events. But again, the materiality piece is really on a case-by-case basis. I mean, if we had an add-on platform or an add-on acquisition, if a senior executive has a criminal event and will not be part of the transaction and the company is a thriving business, the deal’s likely to go on, but the terms will change. In another scenario where it’s the single platform being acquired and there’s reliance on leadership staying on board, a material criminal event is likely a deal-breaker. So it really depends on the scenario. And that’s why these client relationships are so important because we actually talk to our clients, find out their intentions, find out what the growth model looks like, and then gauge the qualitative information we develop. We gauge that based on the scenarios that they describe and how they envision the acquisition growing.

EN 18:14 So you’ve been at this, as we said, now since the 1990s. What is the biggest change that you’ve noted other than technology?

JM 18:22 I think the biggest change is, again, not to harp on Google PI or otherwise known as Dr. Google here, but the biggest change for us is that as these tools come into the market and clients are using them, they’re actually well-versed or becoming well-versed in our industry and what it takes to do a background investigation and what it takes to do a background investigation within the realm of regulation in the US or under GDPR. We’ve seen an increased concern and new dynamics where our clients want to know about the privacy of our individuals and making sure that data is protected. And so I think any trends we’re seeing have been positive trends and it’s behavioral, it’s technological. One drives the other. But at the end of the day, I think we just have a smarter market, and it keeps us smarter and it helps us all achieve the greater goal of helping our clients do deals and protecting the privacy of the individuals we investigate. I mean, everything we do, at least on the investment side, is consent-based. On the litigation side, the laws don’t require us to have consent, but we see an increased behavioral change with our clients where they’re asking more questions on how does technology affect the work type that we do? So again, we see both the technological and behavioral driving each other.

EN 19:58 And with this adoption of the tools that are becoming more readily available and your clients are becoming better at using them, how much of your job has morphed into teaching clients how exactly to use these tools to make sure that they’re not crossing any boundaries if we’re outside of litigation?

JM 20:15 I would say our team spends anywhere from 10% of their time teaching on the actual tools. We create modules for clients so that if they’re using information, they’re using it efficiently, they’re using it correctly, they’re interpreting the data correctly. There’s a difference between seeing a record in a court system and seeing a bad review on Yelp, for example. So we help them interpret the data, but certainly, we help them search themselves online better and smarter and quicker. But that’s embedded within the work that we do. I mean, we observe what they say. We meet with them annually. We reflect on the deals we worked on. And if there’s any way that we can help them before they sign that letter of intent through these training modules so that they’re better and smarter at the research that they’re doing, that is a high-priority item for us.

EN 21:12 So as you look at the field over the next decade, looking back a little bit on how it’s changed till now, what else do you think is set to change? If you had to guess, what will the nature of the job look like in 2030 versus 2020?

JM 21:25 We’re hoping that artificial intelligence gets to where it needs to be. I mean, certainly, we don’t want to replace our human capital, and you will always need a human touch having oversight of these technological advances. But it’s inevitable artificial intelligence will take over this market. And we need to just make sure it’s within the confines of the regulations that are coming out as well. But in our world today, we’re just running at a quick pace. We need information. We need it quickly. Our investigators need it. Our clients need it. I think artificial intelligence is just going to take over this market in a good way. We’re going to have a lot of knowledge sharing and crossover information from different markets, different countries, different databases at some point that will come together as a big data aggregator. And it’s something that the market needs, I mean, I’m a little surprised that as quickly as AI is advancing, that it hasn’t advanced in a pace that we expect it as investigators. But certainly, by 2030 we will be there.

EN 22:39 That is great insight. Well, Jennifer, thank you so much for joining us today on the ThinkSet podcast.

JM 22:43 Thank you so much.

EN 22:45 [music] This ThinkSet podcast is brought to you by BRG. You can subscribe to the podcast and access other content from ThinkSet Magazine by going to Don’t forget to rate and review on iTunes as well. I’m Eddie Newland, and thanks for listening.

The views and opinions expressed in this podcast are those of the participants and do not necessarily reflect the opinions, position, or policy of Berkeley Research Group or its other employees and affiliates.

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Jennifer Mannino

Managing Director

New York