It’s rarely the financial statements.
Over the last few months I’ve reviewed dozens of opportunities across healthcare, services, manufacturing, and real estate. The numbers are usually the easiest part to analyse. Revenue, margins, working capital — those can all be adjusted, normalized, and underwritten.
The real risk almost always sits somewhere else:
• The founder who is the entire sales department
• The undocumented process that only two employees understand
• The key contract that quietly expires next year
• The “great culture” that turns out to be loyalty to one individual
Financial diligence tells you what the business was.
Operational diligence tells you what the business will be once you own it.
The best acquisitions aren’t just about finding good numbers. They’re about finding companies where value can survive a change of ownership.
That’s where real operators and long-term investors separate themselves from spreadsheet buyers.