Due Diligence Means Just That. So Be Thorough.
One vital area that goes a long way to mitigating that risk is thorough and objective due diligence. The strategic fit can look spot on. The numbers can stack up. But if you haven’t properly understood the business you’re buying — you’re taking a risk. So it’s important to approach M&A from a buyer-led, due-diligence perspective.
Over 65% fail to achieve their strategic objectives
Over 75% fail to deliver the expected financial returns
Nearly 90% underperform against the original investment case within 3–5 years
Look beyond just the transaction and into how the business will continue to operate, integrate, perform and then deliver on your strategic objectives once the deal is done.
Due diligence is not just a financial and legal exercise - they are only part of the picture, because at a high level, many businesses can be made to look good:
Strong headline revenue and profit
Positive growth story
Clear market positioning
But due diligence isn’t about validating the story. It’s about testing how robust that story really is. Look into how the business truly runs day to day.
What Gets Missed
The obvious things such as owner dependency and customer concentration are top of the list when buyers look at a business. However, these are some of the other areas that can be overlooked. And they can create serious issues further down the line once the acquisition is completed.
Systems & Processes: Are they documented, scalable, and repeatable — or reliant on informal ways of working? A merger will normally entail migrating the systems and processes over to the acquiring businesses. This can be fraught with problems if processes are too divergent.
Customers: Aside from looking at customer concentration, there are some key areas to look at. Do any of the relationships go beyond a strong business relationship and into loyal friendships? What is profitability at a customer level? Which customers take which products or services and why? How would you and the business owner maanage the transition in this respect?
Pricing: Who controls customer pricing and how is a price change implemented? It’s surprising how many businesses are held back by systems and processes that do not facilitate an easy implementation of a price increase.
Suppliers: Are there dependencies or informal arrangements that could be disrupted? Aside from distribution exclusivity clauses, what are the potential consequences of an ownership change in the eyes of a supplier?
People: Who actually makes the business work? And what happens if they leave? Identify all the key people, ensure they have job descriptions and go through them! How robust and capable are the next level of management? How tied are they to the owner? Don't be afraid to ask.
Culture: Are the two businesses compatible, or fundamentally different? This should not be treated as a soft factor or an afterthought. In most businesses, the people are often the most important asset, so ensuring the two business cultures can accommodate each other is an important element.
Why These Matter
These areas directly affect:
Risk
Value
Integration complexity
If missed, they show up later as performance issues, integration challenges, unexpected costs, and loss of key people or customers.
Remember: You’re not just buying numbers
You’re buying a way of operating, relationships, a team, and a culture. If you don’t understand those properly, you’re making assumptions — and that’s where value gets lost.
How to Approach It Properly
Look beyond the financials
Spend time in the business
Identify dependencies
Challenge assumptions
Link diligence to integration planning
The Bottom Line
Due diligence is your opportunity to understand what you’re buying before you commit.
Get it right, and you gain clarity and control and more certainty. Get it wrong, and you inherit problems you didn’t price in.
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