How to Conduct Due Diligence in Acquisitions

When I first started doing this work, I’d just do what the Client asked for. Until I had this case: We once had a Client invest $XX million in a company where the Client wanted to go fast and only focus on red flags - a basic check list to get the deal over the line. Six months later, all hell broke loose: - Payments delayed with flimsy excuses - Partners complaining about breach of contract - Promises of buying inventory that never happened Turns out, this company had a history of fleecing partners. And now our client was tied to the mess and had to clean it up. What I learned: A track record of burning bridges won't show up on a check list approach. Sure you might be able to find some litigation in the public record, but the company could chalk that up to the normal course of doing business. To catch these problems, you need to dig deeper: 1) Reference checks with past partners, not just the cherry-picked ones 2) Litigation searches for contract breaches, judgements, complaints. Where litigation databases are not available, do the manual records retrievals (despite some taking up to 2 weeks). Where even that is not available, do discreet source inquiries! 3) Forensic analysis of financials for cash flow issues or payment inconsistencies Real investigative due diligence means vetting how a company operates inside and out, and preventing surprises from showing up. #dealintelligence #duediligence #PrivateEquity #mergersandacquisitions

Last October, a seasoned investor lost $1.1 million in a single afternoon. Why? Because he skipped proper financial due diligence to "seize the opportunity”. Then he came to us. Here’s how we helped: 1️⃣ Quality of Earnings Analysis We looked past profits. Isolated recurring revenue from one-time gains. Uncovered accounting adjustments hiding real performance. 2️⃣ Balance Sheet Verification We verified assets. Identified off-balance sheet liabilities. Validated working capital to support the deal value. 3️⃣ Cash Flow Assessment We traced historical cash flow. Tested capex needs and future projections. Stress-tested numbers against market realities. 4️⃣ Tax Structure Review We flagged hidden tax risks. Checked compliance gaps. Found restructuring opportunities to optimize post-deal outcomes. 5️⃣ Financial Control Evaluation We assessed internal controls. Reviewed reporting systems. Spotted governance risks that could derail integration. The results?  ✅ ROI increased by 34% ✅ Deal risk reduced by 78% ✅ 92% of surprises eliminated post-acquisition. The investor later admitted: "I thought speed was my edge. Now I know—it’s only smart if you're rushing in the right direction." Strong due diligence tells the story behind the numbers. Don't let hidden risks sink your next deal. I help investors uncover the truth, fast and thoroughly. DM "Diligence" to protect your next transaction. #financialduediligence #finance #accounting 

𝐈𝐧𝐯𝐞𝐬𝐭𝐨𝐫 𝐃𝐮𝐞 𝐃𝐢𝐥𝐢𝐠𝐞𝐧𝐜𝐞 𝐂𝐡𝐞𝐜𝐤𝐥𝐢𝐬𝐭 Most investors skip real diligence and rely on gut feeling. This guide shows how to do it right—with 13 sections covering everything from team dynamics to intellectual property and regulatory risk. Key Takeaways: 1️⃣ Assess the founders deeply – Commitment, character, skill gaps, and chemistry between co-founders matter more than pitch polish. 2️⃣ Understand the business and its shares – Look at the current cap table, any preferred shares, valuation logic, and exit assumptions. 3️⃣ Analyze market position – Demand validation, USP clarity, competitive landscape, and pricing logic are all musts. 4️⃣ Test the tech – Look for IP protection, market readiness, potential platform effects, and adaptability to shifting trends. 5️⃣ Scrutinize financials and projections – How realistic is the model? What assumptions drive it? When will it be cash-flow positive? 6️⃣ Go deep on legal, compliance, and governance – IP ownership, employment contracts, litigation exposure, and anti-corruption practices are non-negotiable. 7️⃣ Build your own conviction – Due diligence is personal. Use this checklist as your framework, not your crutch. Credit: Growth Capital Ventures PS. 🔔 Get funded 3x faster with AI-powered fundraising: https://lnkd.in/eF6ZtEHK

The best due diligence questions aren’t about the past. They’re about repeatability. It’s easy to get lost in historicals during diligence. Revenue CAGR, EBITDA margins, year-over-year growth. All important, but only part of the story. In private equity, what really matters is this: Can this business generate the same (or better) results again, without heroic effort? That’s why the smartest diligence processes shift focus from what happened to whether it can happen again. And that means asking questions around repeatability and scalability: Are lead generation channels reliable and cost-effective? Look at CAC, payback period, and lead source concentration. Is the sales engine process-driven or people-dependent? Dig into win rates by rep, pipeline velocity, and quota attainment. Are margins structurally sound or propped up by one-off deals? Analyze gross margin variance by product line and vendor dependency. Is growth supported by systems or stitched together by manual effort? Assess tech stack utilization, automation percentage, and ops headcount vs. revenue. The goal of diligence isn’t just to confirm past performance. It’s to uncover whether the performance is durable. Because in PE, value is created when you can scale what’s working, without breaking what isn’t.

The $100K Due Diligence Mistake That Almost Killed a Business A buyer came to me with what looked like a perfect deal. ✅ Strong cash flow ✅ Long-term customers ✅ Seller financing on the table He did his due diligence. Checked the P&Ls. Verified tax returns. Everything looked good. But here’s what he missed: The seller had been behind on vendor payments for months. At closing, the vendors were made whole—paid off entirely out of the sale proceeds. Then, the real problem hit. After the sale, vendors refused to extend terms. They saw an opportunity to reset the relationship and told the new owner: “No credit. Pay upfront.” Now, he had to inject $100K of his own cash just to keep inventory flowing. The lesson? Due diligence isn’t just about financials—it’s about relationships. ✅ Call key vendors before closing. ✅ Ask if terms will remain the same post-sale. ✅ Assume sellers will do whatever it takes to close the deal. Would you have caught this red flag?