more-arw search

Q&A Forum

What typically gets overlooked on a business acquisition due diligence checklist?

Scout Young's Profile

due diligence checklist

Or put another way, what often doesn't get the attention it deserves in a due diligence checklist?


Sarah Jackson
Title: Associate Editor
Company: Proformative
(Associate Editor, Proformative) |

Proformative has this free

"Acquisition Due Diligence Checklist"

As well as this free white paper:


Best... Sarah

Topic Expert
Wayne Spivak
Title: President & CFO
LinkedIn Profile
(President & CFO, |

The effect of add-backs on the business and what growth factor it could have played if it weren't an add-back.

Topic Expert
Regis Quirin
Title: Director of Finance
Company: Gibney Anthony & Flaherty LLP
LinkedIn Profile
(Director of Finance, Gibney Anthony & Flaherty LLP) |

The piece that is often overlooked or mis-judged relates to the expense of integrating the operations of two companies, including the expected resignation of key employees. You may find that the top Sales people in the entity you are acquiring have no desire to join your company. If you consider a standard 80-20 rule (80% of Sales is transacted by 20% of the Sales Force), and your 20 resigns, what have you purchased?

Lyle Newkirk
Title: CFO
Company: Corrigo Incorporated
(CFO, Corrigo Incorporated) |

Social issues are toughest. Keep an eye on who will or will not get along, realizing that your own staff may be working to torpedo success in the deal.

Also watch for state and local tax issues, which typically are a bigger problem than federal.

Joseph Kershenbaum
Title: EVP, Operations
Company: Salute Homecare LLC
LinkedIn Profile
(EVP, Operations, Salute Homecare LLC) |

After having managed many, many acquisitions, what I find missing time and again on a due diligence checklist is the human factor. It's never on a checklist, but it's the most important factor in acquiring a company (assuming that it's not just, e.g., technology that's being acquired). Everything can look great from a financial, legal, technological, geographical, etc. perspective, but most acquisitions fail due to cultural differences. Companies are about people. If the human element is ignored, there's a much greater likelihood that the acquisition will fail or will end up costing far more than expected.

Topic Expert
Linda Wright
Title: Consultant
Company: Wright Consulting
(Consultant, Wright Consulting) |

I fully agree with the point on people. Also often underestimated are the costs of completing litigation/defense that is not indemnified and systems integration.

Topic Expert
Christie Jahn
Title: CFO
Company: Prime Investments & Development
(CFO, Prime Investments & Development) |

We took over another store once and didn't feel like any of the existing staff would be a good fit into our culture so we let them all go immediately. In retrospect that probably was a bad move. We scrambled for months trying to build a completely new team. All it did was cost us resources we really didn't have. If I had the choice again, I would retain at least the ones that may be salvageable; work really close with them while adding new associates to the mix. If they just can't make the transition at least we can say we gave it effort and didn't leave the store so short staffed we probably lost more business in the long run. What I am trying to say is I agree - People and cultural fit would definitely be the most impacting issues I have witnessed.

Len Green
Title: Performance Improvement Consultant and E..
Company: Haygarth Consulting LLC
LinkedIn Profile
(Performance Improvement Consultant and ERP Strategist, Haygarth Consulting LLC) |

Building on Christie's note, I would add this: depending on what type of acquisition it is, look for signs that your organization (the buyer) staff does not assume that the acquired's staff are automatically inferior to them (whether in skills or reporting lines in your post-integration org chart). I've seen people adopt that superior attitude for no reason other than politics, and create a mess as a result.


Get Free Membership

By signing up, you will receive emails from Proformative regarding Proformative programs, events, community news and activity. You can withdraw your consent at any time. Contact Us.

Business Exchange

Browse the Business Exchange to find information, resources and peer reviews to help you select the right solution for your business.

Learn more

Contribute to Community

If you’re interested in learning more about contributing to your Proformative community, we have many ways for you to get involved. Please email [email protected] to learn more about becoming a speaker or contributing to the blogs/Q&A Forum.