Due diligence is crucial to inform M&A decisions and guide buyers' next steps, from pricing all the way to post-purchase priorities. But the standard, financial-focused approach means few investors reap the full value that due diligence could provide. A holistic approach goes deeper into current operations by examining areas you may not have considered and connecting the dots to accelerate value creation.
This more complete exploration of a potential acquisition pays off by helping you identify critical value drivers, risks and opportunities to achieve the value hypothesis. The findings can shed light on everything from human capital and real estate consolidation to weaknesses in operations, technology and customer retention that may require investment to achieve the original value proposition.
Financial due diligence alone often misses the mark — especially in private equity (PE) transactions, where the investment premise hinges on precise calculation of multiple value drivers. It's a major reason why so many M&A deals fail to deliver the benefits investors expect.
Your PE deal team needs to know how to account for the many variables that create profitable portfolio companies. But unanticipated risks in technology, marketing, benefits, operations and other areas can make it hard to achieve the value you banked on. For example:
It's impossible to predict all the ways an acquisition can go wrong, but holistic due diligence uncovers pitfalls that a traditional approach often misses.
While investors often pursue due diligence with multiple providers, these siloed assessments limit your view of the big picture and prevent effective planning. This fragmented approach makes it hard to address interdependent questions like:
Working with multiple providers puts heavy time demands on the PE firm and makes your deal team responsible for identifying all the interdependencies. Having one provider for all due diligence helps streamline the process.
And, by sharing findings and collaborating throughout the process, a single provider's experts can better identify any issues that demand a closer look and deliver deeper insights about their findings. Holistic due diligence could lead to a change in the purchase price based on deficiencies you found in human capital or operational assessments, for example.
A holistic approach can also accelerate post-close value creation plans by helping the deal team prioritize issues and opportunities that due diligence revealed, such as real estate consolidation or urgent technology upgrades. Your improvement plan becomes faster and more effective when you know which needs to address first.
You won't know what risks and opportunities a company presents unless you look. Before proceeding with any transaction, you should carefully evaluate your due diligence needs . Sometimes, a few areas are enough to give you a clear picture, while complex acquisitions may require you to pursue due diligence in more of these key areas.
Investors universally recognize the need for financial due diligence to assess the current financial state of the target's business operations. A thorough revenue review helps you:
Taking a close look at the benefits, payroll and human resources processes and policies helps your PE firm identify key differences between multiple entities, allowing you to:
Technology can be a key differentiator in determining risk, value and competitive advantage. Tech-focused due diligence can help you:
Forensic financial health checks can detect red flags that may indicate risk. These under-used due diligence services:
Operational due diligence makes it easier to spot opportunities to create additional value. It helps you:
Assessing human capital and leadership lets you spot potential leadership team gaps, organizational overlaps and performance differences so you can:
With an ESG benchmark assessment, you can gauge the target company's ability to meet regulatory requirements now and in the future. Due diligence on key sustainability issues helps you:
Evaluating a target company's marketing and communications helps you understand how effective current strategies are so you can:
A target company's revenue data and customer intelligence hold a wealth of opportunities for PE firms. Using predictive analytics and other artificial intelligence (AI) solutions, your due diligence provider can help you extract data-driven insights from these resources to:
Pre-acquisition integration planning lets you begin adding value as soon as the deal closes. Skilled due diligence providers can work collaboratively with your team and the target to:
When you work with a single due diligence provider to uncover all potential pitfalls and opportunities, you'll gain deeper and more integrated insights that give you a head start on the execution stage of your potential deal. Armed with this data, you can fine-tune the steps in your value creation plan and accelerate their sequence to create value more quickly.
A provider with expertise in all areas of due diligence can also help you determine key focus points for your transaction so you can direct resources strategically without overlooking material risks.
Don't let the time and money costs of overlooked problem areas or uncoordinated findings torpedo your acquisition value proposition. Connect with our experienced private equity advisory team to assess your needs and unlock more value in the due diligence phase of your next M&A with a holistic approach.
