Why Operational Due Diligence is the Key to Unlocking M&A Value

sebandersen
May 6
4 min read

Updated: May 12

As 2025 advances, the M&A landscape is becoming sharper, leaner, and more demanding. High-multiple stories backed by thin logic and vague integration hopes? They’re out. Investors and acquirers aren’t just chasing growth—they want certainty. In the age of elevated rates, compressed margins, and relentless macro noise, they’re asking harder questions:

Does this business scale?
Can it integrate cleanly?
Will it deliver on its promise? Or drain value post-close?

This is where Operational Due Diligence (ODD) has become a strategic imperative. It’s no longer a support act. It's a strategic filter, a risk radar, and a value unlock mechanism all in one. Let’s talk about why it matters more than ever..

I. Beyond Red Flags: What Operational Due Diligence Really Does

In too many deals, ODD still shows up late, thin, or reactive. A light scan of functions. A few management interviews. Maybe a slide or two on IT. That’s not diligence—it’s delay in disguise.

Modern ODD reframes the exercise entirely. It’s not just about spotting problems. It’s about shaping the deal, challenging assumptions, and revealing what’s operationally possible—before capital is committed.

What best-in-class ODD delivers:

Scalability testing: Are systems and teams ready to support the growth story, or will they break under pressure?
Functional maturity scans: Where are the cracks in finance, ops, tech, or talent that will limit synergy capture?
Integration foresight: What’s lurking in contracts, culture, or leadership gaps that could stall progress post-close?
Execution sequencing: What’s Day 1-ready? What requires phased execution to maintain momentum?

Consider a recent example: In one recent cross-border deal, our team flagged warehousing capacity as a silent bottleneck. Had the buyer assumed scalability without validation, post-close operations would have hit a wall. Instead, the team developed an interim logistics strategy, re-routing volumes while investing in expansion. The result: zero service disruption, protected margins, and accelerated integration. That’s the difference between reacting and leading.

This is the power of ODD: it turns potential blind spots into concrete levers.

II. ODD for Buyers and Sellers: A Win-Win Advantage

ODD isn’t a one-sided tool. On the buy side, it sharpens pricing, exposes risk, and feeds real integration planning. On the sell side, it strengthens the equity story, speeds up diligence, and protects value by getting ahead of red flags:

What buyers gain:

A more accurate view of what they’re actually buying—and what it will take to integrate it
Evidence to adjust valuation based on execution risk, not just financial forecasts
A head start on synergy planning with real-world input from the frontline

What sellers gain:

Fewer surprises during exclusivity—buyers trust what they can validate
Higher multiples, as operational readiness becomes a premium signal
Shorter timelines, smoother processes, and more control over the narrative

Vendor-backed ODD isn’t just “nice to have.” It’s becoming standard, especially in PE exits. Smart sellers know that staging the business operationally is just as critical as presenting clean books.

III. Cross-Border Complexity: Higher Stakes, Higher Scrutiny

As global M&A rebounds, cross-border deals are back on the table - with all their operational complexity in tow. These deals demand more than strategy. They demand executional fluency across jurisdictions.

Best practice ODD for international deals includes:

Local execution playbooks that adapt to jurisdiction-specific realities
Regulatory risk frameworks that reflect local law, compliance norms, and data controls
On-the-ground leadership assessments that test local management’s capacity to lead change
Pre-sign integration planning that incorporates global supply chains, distributed teams, and systems variation

Failing to run this level of diligence? It doesn’t just slow integration. It invites cost blowouts, talent flight, and regulatory delays.

IV. Why Most ODD Still Falls Short

Despite its growing visibility, ODD remains underpowered in many deals. Why?

It’s brought in too late, after key decisions are already made
It relies too heavily on anecdotal management views, not real operational testing
It misses high-impact functions like customer service, tech infrastructure, or logistics
It isn’t embedded into the deal model or integration plan—so risks stay hidden

The result? Surprise costs. Delayed synergies. Talent churn. Customer disruption. All avoidable. The fix? Elevate ODD from a side process to a central lens. One that’s coordinated across financial, legal, and integration teams from day one.

V. Final Word: The M&A Differentiator in 2025

In today’s M&A market, deals are harder to source, structure, and deliver. Margins for error are razor-thin. The difference between success and struggle isn’t just in what you pay. It's in what you knew going in and how you executed coming out.

ODD is your edge.

It turns assumptions into actions. It connects deal teams with operators early. And it ensures that when the ink is dry, you’re not just closing—you’re executing.

Thinking about your next deal—or your next divestiture? Ask the question that matters:

If you’re preparing a sale or considering your next acquisition, now’s the time to ask: do we really understand how this business runs - and what it will take to win post-close?

Clarity in execution starts with the right conversation. Let’s have it.

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Disclaimer:The information provided in this article is for general informational purposes only and does not constitute legal, financial, or professional advice. ClarityNorth Partners makes no representations or warranties of any kind regarding the accuracy, completeness, or suitability of the information. Readers should consult with their advisors before making any business decisions based on this content.