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Acquisition Due Diligence That Goes Beyond the Numbers

Legal, financial, and operational due diligence that shows you what you're really buying, not just what the seller is selling.

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About Due Diligence

Due diligence is the work of verifying a business before you buy it, instead of taking the seller's word for it. It comes down to three questions. Are the earnings real and repeatable? Are there legal obligations or liabilities waiting for you after close? And can the business keep running, and growing, without the current owner holding it all together? That last question, operational due diligence, is where the surprises usually hide.

Most deals don't fall apart at the offer. They fall apart after, when the real picture comes through. A business looks clean on a P&L, then you find out one customer is 40 percent of revenue, the owner is also the top salesperson, and a chunk of the margin came from an addback that won't survive your first year. The numbers a seller hands you are a starting point, not the truth.

That's our job. We run a coordinated diligence process across financial, legal, and operational areas, so the risks surface before you sign, not after. On the financial side we dig into revenue quality, margins, cash flow, and owner adjustments to confirm what the business actually earns. On the legal side we review contracts, liabilities, IP, and compliance. And because we came up through operations, we look hard at the things that never show up on a financial statement: the people, the processes, the dependencies, and how much of the business walks out the door with the seller.

Statistics

70 to 90 percent of acquisitions fail to deliver the value the buyer expected. Weak or skipped diligence is one of the most common reasons why.
42 percent of failed deals trace back to overpaying, and another 31 percent to inadequate due diligence. Both are exactly what diligence is built to catch.
A $100,000 overstatement in EBITDA can swing the purchase price by $1 million at a 10x multiple. Confirming what a business really earns is the highest-leverage work in any deal.

42%

of failed deals trace back to overpaying

31%

of failed deals due to bad due diligence

<90%

of acquisitions fail to deliver the value the buyer expected

What to Expect

Our diligence work covers three areas, and we coordinate them so nothing slips through the gaps between them.

Financial Due Diligence

We test whether the earnings are real and repeatable. That means examining revenue quality, margins, cash flow, liabilities, and the owner adjustments that often inflate a headline number. You come away knowing what the business actually earns, and whether the asking price reflects it.

Legal Due Diligence

We coordinate the review of contracts, obligations, IP, compliance, and corporate structure, so the liabilities that don't appear on the income statement get identified before they become yours.

Operational Due Diligence

This is where we go beyond the numbers. We assess how the business actually runs: people, processes, systems, dependencies, and how much rests on the current owner. It's the diligence most buyers skip, and the one that most often decides how ownership actually feels once the deal is done.

Found a business you're serious about?

Before you sign, let us look under the hood. Tell us about the target, and we'll walk you through how we'd approach diligence, what we'd want to see, and where the real risks tend to sit.

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Frequently asked questions

What is due diligence when buying a business?

It's the process of verifying a business before you buy it: confirming the earnings are real, checking for hidden legal obligations, and testing whether the business can run without the current owner. At BBA, we cover all three.

How long does due diligence take?

For lower middle market deals, 30 to 60 days is common, depending on the size of the business and how quickly the seller provides information. A rushed timeline is a risk, not a convenience.

What is a quality of earnings report?

A quality of earnings (QoE) report tests whether a company's reported profit is real and repeatable, stripping out one-time items and questionable owner adjustments. It's the core of financial diligence, and often the difference between a fair price and an inflated one.

What's the difference between financial, legal, and operational due diligence?

Financial diligence checks whether the earnings hold up. Legal diligence checks for contracts, liabilities, and obligations that follow the business after close. Operational diligence checks whether the business can keep running without the current owner. We coordinate all three.

Can I renegotiate or walk away if diligence finds problems?

Yes. Findings that weren't disclosed up front are legitimate grounds to adjust the price or terms, and most purchase agreements include contingencies that let you exit if something serious turns up. The point of diligence is to find those things while you still have leverage.