acquisition financing
In 2025, global acquisition financing activity is projected to reach its highest level in four years, according to Reuters. With this surge in deal-making, the importance of thorough due diligence cannot be overstated. Skipping critical steps can expose buyers to unnecessary risks, hidden liabilities, and failed integrations that compromise long-term value.
At FinanceBoston, Inc., we know that successful acquisition financing starts with smart planning and careful execution.
Seven common due diligence acquisition financing mistakes
1. Overlooking Financial Red Flags
Financial statements tell only part of the story. Buyers often fail to identify issues such as unpaid payroll or sales taxes, pending audits, or aggressive tax practices. Obtaining a quality of earnings report can reveal inconsistencies, nonrecurring revenue, and working capital needs. On-site acquisition financing inspections may also uncover problems like obsolete equipment or inflated inventory values.
2. Missing Hidden Liabilities
Unreported liabilities can quickly turn a promising deal into a costly mistake. Forensic accounting techniques can help uncover off-balance-sheet risks, including undisclosed liens, environmental violations, pending lawsuits, and executive compensation agreements like golden parachutes.
3. Overestimating Projections
Overly optimistic projections can lead buyers to overpay. Stress-test revenue and cash flow forecasts, and evaluate customer concentration risks to ensure they are realistic and sustainable. Always verify that assumptions align with historical performance.
4. Ignoring Weak Internal Controls
Poor internal controls increase exposure to fraud and operational inefficiencies. Issues such as a lack of segregation of duties or poor inventory tracking should be flagged early. A thorough internal control review helps buyers anticipate risks and implement corrective measures.
5. Misjudging Tax Implications
The structure of a deal—asset purchase vs. stock purchase—can dramatically alter tax outcomes. Creative deal terms like earnouts or installment sales may provide tax advantages if structured correctly. It’s essential to evaluate state and federal tax implications before closing.
6. Rushing Due Diligence
Fast-tracking due diligence often results in costly oversights. Comprehensive reviews of financials, contracts, and operations are necessary to identify hidden risks. Pay particular attention to
- franchise agreements
- insurance policies
- leases that may require renegotiation before closing
7. Flying Solo
Acquisition financing is complex. Attempting do-it-yourself due diligence leaves room for missed details and costly mistakes. Engaging professionals with M&A expertise ensures a more thorough, efficient, and value-focused process.
Partner with FinanceBoston for Smarter Acquisition Financing Deals
If you’re considering an acquisition or merger, don’t go it alone. At FinanceBoston, Inc., our experienced team helps buyers:
- * Uncover hidden risks
- Optimize deal structure for tax efficiency
- Negotiate favorable terms
- Manage post-acquisition integration and accounting
Contact FinanceBoston today to strengthen your due diligence process and maximize the value of your next deal. We can assist with audits, internal inspections and financing advice.
FinanceBoston, Inc.
33 Broad Street
Boston, MA 02109
617-861-2041
https://financeboston.com/
