You're about to sign a deal that could make or break your next five years. Whether you're buying a business, investing in a partnership, or acquiring a competitor, commercial due diligence is the only thing standing between you and a catastrophic mistake.

But here's the thing: most people get it wrong. They rush the process, skip critical steps, or rely on surface-level analysis that misses the red flags hiding in plain sight.

Let's fix that. Here are ten things you absolutely need to know before you sign anything.

1. Know What You're Actually Buying (And Why It Matters)

Commercial due diligence isn't just a box-ticking exercise. It's an objective evaluation of whether the target company can actually deliver what it promises. Think of it as the business plan you wish the seller had written: honest, detailed, and focused on strategic risks and opportunities.

Before you commit, you need clarity on scope. What data will you access? What timelines are realistic? If the seller is being vague or evasive about disclosure, that's your first warning sign.

2. Lock Down the Legal Paperwork First

No handshakes. No gentleman's agreements. Before you exchange a single piece of sensitive information, both parties must sign a non-disclosure agreement (NDA) and a letter of intent.

These documents protect you from information leaks and formalize the process. Without them, you're exposing yourself to unnecessary legal risk. And if the other party resists signing? Walk away.

3. Assemble Your Team (Or Hire the Right Experts)

You wouldn't perform surgery on yourself. Don't try to conduct commercial due diligence alone, either. You need either an internal team with the right expertise or a third-party agency that knows what they're doing.

The quality of your investigation determines the quality of your decision. Cut corners here, and you'll pay for it later. At Zazinga Group, we've seen too many deals fall apart because someone thought they could DIY the diligence process.

4. Dig Deep Into Financial Health

Surface-level financials won't cut it. You need at least three years of tax returns, audited and unaudited financial statements, and a clear picture of historical performance ratios like gross profit, net profit, and return on capital employed (ROCE).

Pay special attention to revenue sustainability. Is growth organic, or are they propping up numbers with unsustainable practices? And don't forget about inherited tax liabilities: those can blindside you post-acquisition if you're not careful.

5. Scrutinize Customer Concentration and Churn

A company might look healthy on paper, but if 60% of its revenue comes from two clients, you're sitting on a ticking time bomb. Customer concentration risk is one of the most common deal-killers we see in workplace fraud investigations and commercial disputes.

Look at customer acquisition costs (CAC) versus lifetime value (LTV). Examine churn rates and satisfaction metrics. High churn or elevated acquisition costs signal deeper problems with the business model.

6. Understand the Competitive Landscape

Who are the real competitors? What's the market size? Where does the target company actually sit in the pecking order? Too many buyers take the seller's word for it and end up overpaying for market share that doesn't exist.

Study barriers to entry, competitor positioning, and the target's unique selling propositions (USPs). If they can't articulate what makes them different, there's probably a reason for that.

7. Assess Operational and Supply Chain Dependencies

A business is only as strong as its weakest link. Review key suppliers, vendors, and distribution channels. What happens if a critical supplier goes under or doubles their prices? Can the current operational systems handle increased volume post-acquisition?

Inventory practices, logistics, and scalability matter more than most buyers realize. A company that looks profitable today can turn into a money pit tomorrow if the infrastructure can't support growth.

8. Evaluate Management and Retention Risks

People run businesses. If the key players walk out the door after the deal closes, you've just bought an empty shell. Evaluate organizational structure, turnover rates (especially in R&D and sales), and compensation practices.

Identify integration risks early. Are there retention agreements in place? What's the company culture like? Will your management style clash with theirs? These aren't soft questions: they're deal-critical.

9. Identify Regulatory, Legal, and Macro Risks

Pending litigation. Compliance gaps. Licensing issues. Antitrust concerns. These aren't hypotheticals: they're liabilities waiting to explode in your face if you don't uncover them during due diligence.

Review compliance policies thoroughly. Understand exposure to regulatory changes, macroeconomic shifts, and trade policy risks. We've worked on criminal defence investigations where the buyer inherited legal problems they had no idea existed. Don't let that be you.

10. Validate Strategic Fit and Synergy Assumptions

This is where emotion meets reality. Does this acquisition actually align with your strategic objectives, or are you chasing a shiny object? Can you realistically achieve the financial and operational synergies you're banking on?

Unrealistic synergy assumptions kill more deals than anything else. Your investment thesis needs to reflect current business operations: not best-case scenarios that require perfect execution and a miracle.

The Bottom Line: Focus on Signals, Not Noise

Commercial due diligence isn't about collecting every piece of information you can find. It's about identifying the signals that matter: the data points that reveal commercial viability and hidden risks.

Customize your checklist to fit your specific deal. A tech startup requires different scrutiny than a manufacturing business. The more targeted your approach, the better your decision-making.

And if you're feeling overwhelmed? That's normal. These processes are complex, high-stakes, and unforgiving of mistakes. That's exactly why expert guidance exists. At Zazinga Group, we specialize in cutting through the noise and delivering the clarity you need to make confident decisions.

You're about to make a significant commitment. Make sure you're doing it with your eyes wide open.

Zazinga Group

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