Due diligence is the backbone of any merger, acquisition, or investment. When executed well, it builds trust and accelerates deal closure. When mishandled, it can derail months of negotiation.
1. Financial Due Diligence
Investors verify:
- Revenue accuracy
- Expense categorization
- Tax compliance
- Working capital needs
- Debt obligations
Weak financial hygiene is a leading cause of valuation reduction.
2. Operational Due Diligence
Operational insights include:
- Efficiency of workflows
- Supply chain reliability
- HR capabilities
- Scalability of operations
Companies that demonstrate maturity gain investor confidence.
3. Legal & Compliance Due Diligence
Investors evaluate:
- Contracts
- Licenses
- Regulations
- Liabilities
- Intellectual property
Any undisclosed risk is a red flag.
4. Technology Due Diligence
In digital-first markets, tech infrastructure is a major valuation driver. Stability, scalability, and cybersecurity matter.
5. How to Prepare
Companies should:
- Standardize documentation
- Maintain clean financials
- Fix compliance gaps
- Conduct pre-due-diligence audits