Glossary · Diligence
Operational due diligence
Definition
Operational due diligence looks at how a company actually runs day to day: its processes, IT systems, supply chain, sites, management team and key people. It finds the costs and risks that financial and legal reviews miss, and it is the starting point for planning integration after the deal.
Where operational due diligence comes up
On this site, in our guides and in the conversations we've written up.
Related terms
Due diligence The investigation a buyer, investor or lender runs on a company before committing: its finances, contracts, legal position and operations. Post-merger integration Combining two businesses after a deal closes: people, systems, processes and customers. Commercial due diligence A test of the target's market, customers, competitors and growth plan, to see whether the business case holds. Financial due diligence Diligence on the numbers: earnings, working capital, debt and cash flow behind the headline figures. Legal due diligence The lawyers' review of a company: ownership, key contracts, disputes, licences, employment terms and intellectual property. Red flag report A short diligence report that lists only the serious issues, instead of describing everything that was reviewed. Tax due diligence A review of the target's tax filings, structures and exposures, so hidden tax liabilities are priced in or covered. Vendor due diligence Due diligence a seller commissions on its own business before a sale, so bidders get one independent report up front.