For dealmakers, assessing value-creation opportunities begins well before the deal closes. Identifying potential sources of value is only the first step. The more important question is whether the assumptions behind the investment thesis can be assessed before signing.
That distinction matters in a competitive market. A buyer may identify growth prospects, procurement savings or operational improvements as potential sources of value. But an opportunity on paper is not the same as a realizable path to EBITDA growth. Leading buyers are using diligence not only to find risk, but also to assess their value-creation opportunities.
Test the thesis, not just the risks
Historically, diligence answered a critical question: What could go wrong? It focused heavily on understanding earnings and financial risks. While that work remains essential, it primarily protects against value destruction.
Value creation requires a different question: Which assumptions are expected to create value, and what outcomes can be realized?
Rather than making broad assumptions such as “we will scale the business,” or “we will reduce costs,” buyers use diligence to evaluate the specific operational, commercial and financial levers that must be activated for those outcomes to occur. The objective is not to complete a detailed value-creation plan before signing; rather, it is to enhance confidence and lay the foundation to realize upside post-close.
Assess the assumptions behind the thesis
A more value-focused diligence process connects the financial case with operational realities. During diligence, buyers can begin to assess the assumptions and levers behind their value-creation hypotheses, including:
- Growth: Are revenue assumptions grounded in identifiable customers, markets or capabilities?
- Procurement: Are projected sourcing synergies supported by actual spend, pricing and vendor data?
- Capacity: Can existing facilities produce more without significant additional investment?
- Operations: Can logistics, processes, staffing or systems be improved within the ownership period?
- Technology and artificial intelligence: Can technology modernization, automation or AI-enabled processes improve productivity, scalability or decision making?
- Data and governance: Does the organization have the financial visibility, performance metrics and decision-support capabilities needed to identify, execute and sustain value-creation initiatives?
Use validated insight to bid with greater conviction
When buyers understand both the current earnings profile and the value that can realistically be unlocked, they can make more informed judgments about price and returns. A validated thesis can help assess whether the buyer should increase conviction, adjust the offer, focus on different value levers or walk away altogether.
That perspective may matter to sellers and management teams as well. A bidder that can articulate how it intends to strengthen the business may present a more compelling path forward than on price alone.
These insights do not eliminate uncertainty, and the depth of pre-close analysis should reflect the quality of available data, the buyer’s confidence in the transaction and the capital at risk. Still, bringing operational expertise into diligence earlier can replace unsupported projections with a better-informed range of outcomes and priorities.
Turn projected value into realized value
For investors, the ultimate test is not whether value-creation initiatives appeared in the investment committee materials. It is whether those improvements were implemented and reflected in performance.
Starting the analysis during diligence creates continuity from thesis to execution. After closing the deal, the buyer can evaluate what remains uncertain, assign ownership, sequence initiatives and track whether projected benefits are being realized. That early start matters because realized improvements can be demonstrated at exit, while unexecuted opportunities may be discounted by the next buyer.
The strongest acquirers use diligence to do more than confirm what they are buying. They use it to confirm the value-creation assumptions that underpin their investment thesis. By understanding which levers are supported by evidence and which require further assessment, they enter the deal with greater conviction in both their bid and their post-close plan.
In today’s market, the advantage is not simply starting value creation sooner. It is knowing, before the deal closes, whether the value-creation story is likely to hold up in practice.
