As the business landscape continues to evolve, so too does the nature of mergers and acquisitions (M&A) due diligence. In the year 2023/24, we witness a remarkable shift from traditional document-based approaches to a more sophisticated, data-driven methodology. This shift carries profound implications not only for investors but also for organizations seeking to successfully navigate the intricate landscape of M&A.

  1. This article discusses the key trends, that are shaping M&A due diligence and provides insights on how to master these changes and due diligences in general.

What is a due diligence

The due diligence is at the heart of every M&A transaction. The due diligence is the thorough investigation of a potential acquisition or investment to confirm crucial facts that impact the buyer's decision and terms. The process of the due diligence ensures the accuracy of information before entering any financial and legal agreements. The due diligence involves understanding a company's commitments, including debts, leases, contracts, legal matters, customer agreements, and more.

M&A demands extensive due diligence to clarify what's being purchased and the obligations involved. Often, a special focus during the due diligence is given to financial aspects, IT, evaluating hardware, software, data protection, and other organizational aspects. However, the focus and the way of doing due diligences has changed in 2023/24.

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How to define the objectives for the due diligence

It is crucial to create transparency and awareness about the objectives of the due diligence. In other words: What do you want to find out? What information and data do you need to conduct an informed decision for a transaction? In general, you can plan a due diligence according to the scope that is important for you. The objective of your due diligence will most likely also correlate to the type of due diligence that you will conduct. Typically, all types of due diligences are one of the following types of due diligences:

  1. The financial due diligence: The financial due diligence focusses on the financial performance of the company. During a financial due diligence, the team needs to find out and ensure that any numbers presented in the reports and financial statements are accurate. The financial due diligence helps to understand the acquirer if the target company has the potential to generate value, growth, synergies or other business objectives that are important for the purchasing company.

  2. The tax due diligence: The tax due diligence focusses on the tax implications of the acquisition. The due diligence team needs to ensure that any tax liabilities are paid in full to date or are transparent to the purchaser. The tax due diligence also reviews at how a merger can affect the tax liabilities of the new entity created by the transaction.

  3. The legal due diligence: The legal due diligence focusses on the legal framework of the transaction. During the due diligence, the team would typically review intellectual property and licenses, regulatory issues that the company has, contracts with customers, partners, suppliers, and any other legal liabilities that may be pending.

  4. The operational due diligence: The operational due diligence focusses on processes and structures of the day-to-day business of the company. This type of due diligence is primarily forward looking, and opportunity focused. Therefore, the operational due diligence complements the risk-oriented types of due diligence very well. The objective of the operational due diligence is to assess the sustainability of the target’s operations into the future.

  5. ESG due diligence: The ESG due diligence offers a comprehensive assessment of material ESG risks, liabilities, and opportunities for a target. It involves an analysis of human capital, product safety, social opportunities and risks, corporate governance practices and policies, business ethics and also governmental aspects and aspects of public policy. In general, the ESG the due diligence helps identify and mitigate potential risks around those factors. This kind of due diligence also starts with setting up a data room, but involves fare more activities such as discussions with key personnel, review of financials ad transactions, site visits and inspections and ESG risk assessments.

  6. Supply chain due diligence: Most companies had to learn the hard way about the critical role of supply chains during the Covid-19 pandemic and still feel impacts from geopolitical disruptions and wars around the globe on their supply chains. Robustness and resilience of supply chains has become a critical business component and measure of success. A supply chain due diligence assesses the performance of the company’s supply chains and provides valuable input into the M&A process. The output from a supply chain due diligence may be a risk and maturity assessment, a benchmarking and/or a portfolio of initiatives that defines the supply chain path forward, as well as likely consequences and impacts on the purchase price.

  7. GDPR in the due diligence process: Recently, the GDPR (European Union's General Data Protection) has accelerated the importance of data privacy, data protection and data compliance with respect to M&A transactions. The GDPR law affects the due diligence process to the fact that data extraction, data analysis and data storage activities must be compliant with the regulation. Any non-compliance with GDPR can result in heft fines.

  8. Privacy and data security due diligence: Privacy and data security matters may come up in two different ways. The first question is: Is the due diligence process itself secure and adequately protective of privacy rights. The second and more complex question, that you have to answer during the process is: Have there been any past data (privacy) breaches, is the target company complying with laws and standards and how is the company dealing with past and future potential breaches. Privacy and data security issues can heavily affect company reputation and purchase price.

Best practice tips

The work with state-of-the art due diligence tools: There is no excuse of not using technology. No matter whether you run your due diligence the traditional way based on documents, or whether your process is fully digitalized and data-centric. Virtual data rooms or entire M&A workspaces like are super easy to use and fast to set up by yourself, and equipped with everything you expect when dealing with sensitive information. Since due diligences are becoming more complex every year, it is imperative to use technology to handle such complex and important processes.
Overcome information asymmetry: Typically, M&A teams face the challenge of information asymmetry during a due diligence. The seller has more information than the buyer. Often, this information asymmetry is not caused by human decisions, but due to shortcomings in technology. You can resolve information asymmetry by ensuring that all parties are provided with complete, correct, and current data, if you use one common platform and data basis. Tipp: You can also include other stakeholders who want to keep abreast of the status of the transaction.
Plan with structure and foresight: Time is a critical factor during a due diligence since there are many influencing factors on the purchasing price and the evaluations. In times of constant change, weeks, even days can make a difference in purchase price evaluation. Due diligence is often characterized by silo thinking where each discipline strives for optimization within its own domain instead of improving the efficiency of the entire transaction Therefore, it is crucial to put a proper plan in place that covers all areas of the due diligence – the financial due diligence, the tax due diligence, the legal due diligence and the operational due diligence. This enormously increases the time, effort, and cost of coordinating, processing and managing your project. Tipp: Use digital M&A suites that keep team members aligned and focused on their goals.

If you would like to discuss or explore best practices with your M&A team, reach out to

Michael Klawon

Michael Klawon

Scientific Practitioner and LMU x Breitenstein Consulting Project Participant

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Article Topics

M&A Platform
Due Diligence