"Taking a provided list at face value" doesn't seem to be the same as "doing due diligence." You don't believe they're doing fraud in advance, you ask the questions that would let you find out if they are - because you know some people have committed fraud in the past.
4 million fake accounts created with a data scientist's help, then "JPMorgan said it learned the truth about Frank after sending out marketing emails to a batch of 400,000 customers. About 70% of the emails bounced back, the bank said in a lawsuit filed last month in federal court."
Nobody did any random sampling and verification earlier? 4 million out of 4.25/4.3M users were fake and you didn't spot it?
Due diligence means investigating the details, not presuming crime. If the founder murdered the staff of JPM in the office, you wouldn't say "guess they didn't do due diligence!" unless the founders had a record.
It's common practice at this transaction size to skip the level of due diligence that you're proposing. The reasons being:
1) It takes a lot of time to do this level of diligence
2) Companies aren't comfortable sending over their entire customer database to a purchaser before a deal is closed. And, if they send over a sampling, it doesn't solve for your use case.
2) There are indemnifications included in the final sale agreement that firmly protect the buyer from cases of fraud like this, so it's not actually necessary from the buyer's perspective.
That's very much incorrect. I do this for a living and I guarantee you that nothing gets skipped at a deal this size and it doesn't have to take all that long either, depending on how heavy the team is.
As for indemnifications: those are worth about as much as the paper they are written on when you're dealing with a fraudster, the money is probably long gone by the time you activate those clauses.
You're claiming that for deals in the $80-120m range, most of the time, the seller sends over their entire database of customer contact info before the deal is closed? I'm sure it happens in some fraction of deals, but to claim a majority seems absurd. That said, you probably know best - I speak from a sample size of 4.
4 million fake accounts created with a data scientist's help, then "JPMorgan said it learned the truth about Frank after sending out marketing emails to a batch of 400,000 customers. About 70% of the emails bounced back, the bank said in a lawsuit filed last month in federal court."
Nobody did any random sampling and verification earlier? 4 million out of 4.25/4.3M users were fake and you didn't spot it?