OPERATIONAL DUE DILIGENCE
Operational due diligence tells you whether a manufacturing business can deliver the plan you are about to pay for. We walk the plant floor and give private equity firms, business owners and strategic acquirers a clear view of operational risk, capacity, cost and Day 1 readiness before the deal closes.
Plant-floor review · Synergy validation · Day 1 risk assessment
Financial due diligence explains past results. Commercial due diligence tests the market. Neither tells you whether the plant can produce the volume in the model, whether the quality system would survive a customer or regulatory audit, or how much of the operating knowledge sits in the heads of two or three people. Those answers are on the floor.
A walk through a plant shows what a spreadsheet cannot: whether the performance boards are current, whether work-in-process is piling up between operations, whether equipment condition matches the capital plan, and whether supervisors describe the process the same way the documents do. Each observation is a lead rather than a verdict, and it tells us where to dig.
The purpose is simple: know what you are buying, and what it will take to deliver the plan, before the price is final.
We scope every review to your investment thesis, so the work goes deep where the value and the risk actually sit. Most manufacturing reviews cover these areas.
We compare demonstrated capacity with nameplate capacity, find the real constraint, and look at equipment condition, maintenance history and the backlog of deferred work. We separate the capital needed to maintain the business from the capital needed to grow it, because the two are often blended in the forecast.
We review corrective and preventive action history, customer complaints, the cost of quality and audit readiness. In cGMP and other regulated environments, we check validation status and how well the quality system would hold up under new ownership and a change in leadership.
We look for supplier concentration, single-source materials, tariff exposure in the bill of materials, contract terms that could change at close, and whether inventory records match what is on the shelves.
We test each synergy assumption against the part of the operation that would have to deliver it, and rate how realistic it is. We also look at labor productivity, scrap and yield, overtime and the cost structure behind the margin.
We assess whether the leadership team can run the business the plan describes, how deep the bench is below them, and where critical knowledge is concentrated in one or two people who could leave.
We look at safety culture, incident history and day-to-day environmental practices on the floor. Where formal environmental site assessments are needed, we coordinate with the specialists who perform them.
We review the ERP and plant systems, how reliable the operating data is, and which manual workarounds keep things running today but would break as the business grows or integrates.
We identify what must be true on Day 1, the integration risks the deal team should price or plan for, and a first view of integration priorities, so the plan does not start from zero after close.
We start from your investment thesis and the synergy case, and agree the three or four operational questions that could change the price, the structure or the plan.
A short, targeted request list built around those questions, so management is not buried in requests during exclusivity and the analysis starts early.
We walk every critical process and talk with supervisors and operators as well as executives, then compare what we see with what has been reported.
You receive a clear written view of risks, opportunities and integration priorities, with the evidence behind each. Material findings are shared as they emerge, while they can still inform the negotiation.
Evaluating a target now? Let's scope the questions that could change the price.
Schedule a CallOutputs are scoped to each deal. Typical deliverables include:
No single observation decides a deal. These are the patterns that most often change the price, the structure or the integration plan.
Low capital spending that hides deferred maintenance. A strong margin can simply reflect equipment that has not been looked after.
Nameplate capacity in the model. Growth plans built on theoretical capacity rather than what the plant has actually demonstrated.
Overtime masking a capacity limit. Output looks stable, but it depends on hours the workforce cannot sustain.
Customer or supplier concentration. One account or one source carrying more of the business than the plan acknowledges.
Open quality issues. Unresolved corrective actions, repeat complaints or a quality system that exists mostly on paper.
Knowledge held by one or two people. Critical process know-how with no documentation and no successor.
Inventory that does not reconcile. Counts, valuations and system records that disagree with each other.
Manual workarounds. Spreadsheets and informal fixes that hold the operation together today and will not survive growth or integration.
The findings from diligence become the first page of the integration plan.
On many deals, diligence is handed to a different team after close, and much of the context disappears in the handoff. Because we also run post-merger integrations for manufacturers, the risks and opportunities we find during diligence become the starting point of the integration plan, with the same people carrying them forward.
The same lens works for sellers. Owners and private equity firms preparing for a sale use it to identify operational challenges before a buyer does, which is the focus of our M&A exit readiness work.
Where we fit
We give your deal team the operational answers the data room cannot: what the plant can produce, what it will cost to deliver the plan and what must be true on Day 1.
“Joe is a go-to person that can be trusted to get the job done. He can analyze a situation and then articulate a clear plan of action.”
Common questions from buyers planning a manufacturing acquisition.
Operational due diligence is a review of how the target business actually runs: its capacity, equipment, quality system, supply chain, people, systems and costs. In a manufacturing acquisition, it answers whether the plant can deliver the plan the buyer is paying for, and what it will take to get there.
Financial due diligence examines reported results and the quality of earnings. Operational due diligence examines the operation that produces those results and whether it can repeat and improve them under new ownership. Both are needed, and each one makes the other more useful.
Most reviews run after a letter of intent is signed, during the exclusivity period. An earlier conversation to scope the key operational questions helps the review move faster and focus on what could change the price or the plan.
It depends on the number of sites, the access available and the questions in scope. We plan the work to fit inside the exclusivity window and agree the timeline during scoping, before any work starts.
Yes. The site visit is the center of the review. If access is limited, we prioritize the processes that matter most to the deal thesis and state clearly what could not be verified.
Yes. We trace each synergy assumption to the part of the operation that would have to deliver it and rate how realistic it is, including what it would cost and how long it would take to achieve.
Yes. Our experience includes cGMP and other regulated environments. In those deals, the condition of the quality system and the validation status can matter as much as capacity or cost.
The findings become the starting point for integration. Because we also run post-merger integrations, we can carry the Day 1 plan and the integration priorities forward without losing context in a handoff.
Tell us about the target and the deal timeline. A short conversation is usually enough to agree what an operational review should focus on.