The success or failure of mergers and acquisitions often hinges on one critical step: due diligence. When companies rush this process or cut corners, they risk significant problems after the deal is done. Hidden debts, legal issues, and operational problems can turn a promising merger into a costly mistake.
At Global Investigations, we help UK businesses carry out thorough due diligence for mergers and acquisitions, uncovering hidden risks before they sign on the dotted line. Our expert team digs deep to find problems that might otherwise remain hidden until it’s too late.
Why Is Due Diligence Essential in Any Merger or Acquisition?
Due diligence is your safety net when buying another company. It’s a deep look at the target company to check what you’re really getting. This process helps buyers confirm assets, spot liabilities, assess how the business runs, and find potential problems.
Looking at financial statements is just the start. Good due diligence also covers legal issues, intellectual property, business operations, and any pending lawsuits or regulatory problems that might affect the company’s value.
The Due Diligence Process: Key Components
A solid due diligence plan covers these main areas:
- Financial Due Diligence – Looking at financial records, audit reports, tax payments, debt, and revenue forecasts to check the company’s financial health.
- Legal Due Diligence – Reviewing contracts, agreements, licenses, intellectual property, and any ongoing lawsuits to spot legal risks.
- Operational Due Diligence – Checking business operations, supply chains, technology, and possible challenges in joining the two companies.
- Commercial Due Diligence – Studying market position, competitors, customer relationships, and growth potential to confirm the business logic of the deal.
- Compliance Due Diligence – Making sure the company follows regulations. This includes data protection, health and safety rules, and industry requirements.
What Are the Most Significant Risks When Due Diligence Falls Short?
When companies rush the due diligence process, problems often follow:
- Undisclosed Liabilities – May include unpaid taxes, hidden debts, legal issues, cleanup costs, or employee benefits that still need to be paid.
- Intellectual Property Complications – Issues like unclear ownership, expired patents, copyright disputes, or weak protections of IP.
- Compliance Failures – Including data breaches, regulatory violations, health and safety risks, or breaches of anti-corruption laws.
How Often Do Mergers and Acquisitions Fail?
Between 70% and 90% of mergers and acquisitions don’t deliver the expected results. That means the companies fail to meet the financial, operational, or strategic goals they set at the start. In fact, over 60% of deals may actually reduce shareholder value instead of increasing it.
A common reason for this is poor due diligence. If buyers find serious problems after concluding the deal, the damage can be hard to fix. It can even ruin the point of the acquisition. That’s why careful checks and solid planning are so important before closing any deal.
What Should a Due Diligence Checklist Include?
A good due diligence checklist guides your investigation. It should cover:
- Financial Records Review – Review 3–5 years of accounts, management reports, forecasts, tax records, and debts.
- Legal Documentation Assessment – Examine contracts, IP ownership, property records, and litigation history.
- Operational Evaluation – Assess staffing, IT systems, supplier relations, and infrastructure.
- Market Position Analysis – Understand the competitive landscape, customer base, market share, and trends.
- Regulatory Compliance Verification – Confirm licensing, environmental adherence, and data protection protocols.
Virtual Data Rooms: Managing the Information Flow
Most due diligence now uses virtual data rooms for secure document sharing. These digital spaces let parties share confidential files safely while tracking who views what. But companies must ensure these rooms contain all needed documents and that their team knows how to spot problems in the materials.
Why Engage Professional Investigators for Due Diligence?
While lawyers and accountants are vital to due diligence, professional investigators bring special skills that can find issues others might miss:
- Background checks on executives and owners
- Finding hidden relationships or conflicts of interest
- Checking the company’s reputation
- Discovering legal or regulatory issues not formally disclosed
- Verifying claimed credentials
- Gathering intelligence from industry sources
Global Investigations’ Approach to M&A Due Diligence
Due diligence is your best defence against costly M&A mistakes. By looking closely at a target company before closing the deal, you reduce the risk of surprise liabilities, operational problems, and strategic disappointments.
Global Investigations provides the expertise needed to conduct thorough due diligence for mergers and acquisitions. Our professional team takes a careful, step-by-step approach. We start with enhanced due diligence, running background checks on the target company, its leaders, and main shareholders to spot any red flags.
We also check if the company follows all the right rules and flag any risks. Our investigators gather market intelligence to confirm claims about customers and competitors. At the end, we deliver a clear, detailed due diligence report to help you make confident, informed decisions.
Protecting Your Investment
Contact us to discuss how we can support your next merger or acquisition. Our team is ready to help you conduct the professional due diligence needed to protect your investment and increase your chances of M&A success.