How Cost-Focused Due Diligence Can Add Value To A Deal

Many buyers are drilling deeper into prospective acquisitions these days, going well beyond testing the revenue-based assumptions to focus on cost structures of a target's income statement. Such cost-focused or "Operational" due diligence can help reduce the risk of negative surprises that may arise from overestimating cost savings or underestimating investment needs. Opportunities for unlocking hidden value are often overlooked due to the feverish pace of dealmaking and the lack of internal operations resources. Some companies tend to overestimate cost synergies because they do not adequately validate their integration plans before a deal takes place.