M&A Adviser Briefing
The five operating signals that determine whether a business will survive diligence — and what preparation work actually changes the outcome.
Transaction Readiness · Revenue Quality · Working Capital · Management Capability · Due Diligence Signals
Each question is answered at the operational level — with context, diagnostic signals and connected resources.
Is the business actually ready for diligence — or will the process reveal operating architecture gaps that compress the price or kill the deal?
Transaction readiness is not documentation. It is operating architecture. A business that has the right documents but lacks operating architecture to support its claims will fail diligence.
- Can the business support its financial claims with operational evidence?
- Does the governance architecture withstand a competent operational diligence process?
- Is the management team capable of presenting the operating architecture — not just the financials?
Is the revenue quality sufficient to survive a normalisation process — and does the adviser know what adjustments the buyer will apply?
Revenue quality normalisation reduces the EBITDA base. The adjustments are predictable: non-recurring revenue, concentration adjustments, pricing governance findings, channel margin inconsistency.
- Has the revenue base been normalised using buyer standards — not management's?
- Are the concentration adjustments the buyer will apply understood and priced into expectations?
- Is pricing governance sufficient to defend the margin at the level the business is presenting?
Does the client understand the working capital peg mechanism — and is the position being managed toward the peg?
Working capital in a transaction is a price adjustment mechanism. The peg is set at normalised levels. If the business delivers less than the peg at settlement, the founder receives less than the negotiated price.
- Has the normalised working capital position been calculated and communicated to the client?
- Is the working capital position being actively managed in the 90 days before completion?
- Does the client understand how a shortfall affects net proceeds?
Can the management team present the business credibly during diligence — or will the process reveal that management depth is a key risk?
Buyers do not just ask management teams to present financials. They ask them to explain their own decision authority, describe how they would operate through a six-month transition, and walk through a specific operational problem and resolution.
- Has the management team been prepared for the operational component of diligence?
- Can they describe their own decision authority clearly and consistently?
- Have they articulated what the business looks like after the founder exits?
Which operational signals will appear in the diligence report — and which can be addressed before the process begins?
Operational due diligence findings follow predictable patterns: governance architecture failures, management depth insufficiency, commercial concentration risk, pricing governance absence and working capital management weakness.
- Has a pre-diligence operational assessment been conducted?
- Which findings are addressable before the process — and which require longer preparation timelines?
- How will the expected findings be presented and positioned during the process?
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