Operational Due Diligence Is Not a Checklist
Too many acquirers treat operational due diligence as a compliance exercise — a checklist to complete before closing. This approach consistently destroys value.
True operational due diligence is an investment thesis validator. It answers the question: “Can this business actually deliver the performance improvements our model assumes?”
Here’s what a rigorous ODD process should cover:
Revenue Quality Assessment — Not all revenue is created equal. Understanding customer concentration, contract quality, pricing sustainability, and competitive positioning is essential. In African markets, this also means assessing regulatory risk and currency exposure.
Cost Structure Reality — Are the cost savings in the model achievable? What does the cost base look like when you normalize for one-offs? Where are the hidden costs — deferred maintenance, underfunded IT, underinvested supply chains?
Operational Capacity — Can the current operating model support growth? Where are the bottlenecks? What capital expenditure is required to scale?
Management Capability — The most underrated aspect of ODD. Can the current management team execute the value creation plan? Where are the gaps?
Integration Complexity — What will it actually take to integrate this business? How long will it take? What are the risks to business continuity?
In my experience, the deals that create the most value are those where the operational DD is done rigorously upfront, and the findings directly inform the value creation plan. The worst outcomes come from deals where ODD is treated as a box-ticking exercise.
