In M&A, diligence is the gatekeeper of value, or if gone unchecked the bottleneck to it. Many due diligence processes are too narrowly on minor and non-material details. While masked behind the stated goal of risk mitigation, the reality is often a lack of ability to see the forest through the trees. This oftentimes leads to analysis that is solely focused on finding problems, not identifying long-term, value producing potential.
At G-Spire Group, we believe successful acquisitions are about more than just what you avoid. While risk mitigation is important, it can distract buyers from spending important time on strategic ways to unlock potential and value. If your diligence process is 80% focused on what could go wrong, you may be blind to what could go exceptionally right.
The Problem: Naturally, Diligence Skews Negative
Risk management is critical to leading towards a successful transaction. This work has to happen. Legal and financial teams, should have influential voices but when risk becomes the only lens, opportunity gets filtered out.
“All too often, due diligence becomes an exercise in verifying the target’s financial statements rather than conducting a fair analysis of the deal’s strategic logic and the acquirer’s ability to realize value from it” — Harvard Business Review. The result of this can lead to teams focusing too much on reconciling numbers that are not material which takes time and capacity away from more important and value-producing risks and/or opportunities. The additional downstream effect of this is actually missing the opportunity to get a plan ready to capitalize on the opportunities a deal presents further increasing the risk of achieving the return targets for the transaction.
One tactic we often lead is prioritizing the ‘opportunity focus’ throughout the entire diligence process. We assign dedicated leaders (such as operations, growth, and integration leads) to champion value creation initiatives. By implementing a risk-opportunity framework, we ensure our teams maintain equal and consistent attention on both mitigating downside risks and driving practical plans to unlock value. The goal is a balanced approach that combines disciplined risk management with proactive strategies to realize the full potential of the transaction.
The Case for Balance: Value Creation is a Diligence Discipline
Data tells a different story than the traditional playbook. Firms that approach diligence with equal rigor on both sides of the ledger, risks and opportunities, outperform.
“Studies have shown that opening the aperture—or looking for new sources of synergies and value beyond the value that justified the deal—can increase synergies by 30 to 150% above due-diligence estimates.” — McKinsey & Company
“Our survey showed that due diligence often ignores as much as 50% of potential merger value because it does not take full transformational synergies into account.” — McKinsey & Company
Balanced diligence isn’t about blind optimism. It’s about gathering and assessing better data, mobilizing to move faster into integration, and creating the foundation for more confident, effective leadership.
Strategic Edge: Winning in a Competitive M&A Environment
As competition for quality deals heats up in the lower middle market, acquirers need sharper tools. Balanced diligence gives them that edge.
- More accurate valuations that reflect both risk factors and opportunity drivers
- Clearer go/no-go decisions based on net value, not just acceptable downside
- Better board and investor narratives centered on strategic upside and value creation opportunities
- Stronger retention of seller-side talent with an integration message built on growth, not fear
In a world of competitive bids and scarce targets, understanding what could go right becomes a differentiator.
How to Build a Balanced Diligence Model
This isn’t just a mindset shift. It’s an operational one. Leading firms are evolving their diligence playbooks to structurally include opportunity assessment.
Structural changes:
- Create “strategic opportunity leads and/or teams” with the same mandate and authority as legal and finance
- Assign executive sponsors to value-creation workstreams
- Use an “Opportunity Diligence Matrix” to guide cross-functional exploration
- Standardize validation protocols for synergy and growth assumptions
Process innovations:
- Start with a strategic value thesis to guide both risk and opportunity analysis
- Run parallel interviews with customers, suppliers, and market stakeholders
- Hold joint risk-opportunity workshops early in diligence
- Design reporting templates that highlight both risk and value potential equally
Diligence Should Reveal the Deal’s True Worth
If you’re only seeing risk, you’re only seeing half the picture. The best acquirers in the lower middle market aren’t just risk managers—they’re value hunters and their diligence reflects that.
Balanced diligence isn’t a luxury. It’s a requirement for smarter decisions, faster integration, and greater long-term returns.