M&A Due Diligence: A Complete Guide

Conducting due diligence within the mergers and acquisitions space is the process of independently researching and verifying information on a potential company to ensure that a viable investment is made on behalf of stakeholders. More than ever, investors need the right information and resources to research and validate a potential deal.

In addition to confirming self-reported information, due diligence is critical to justifying valuation, as well as exposing potential liabilities that may jeopardize a transaction’s success. Whether the M&A landscape is booming or scaling back, the importance of conducting comprehensive due diligence is more critical than ever in order to secure lucrative deals. Having a trusted resource to surface the insights you need in a timely and relevant manner is key in navigating the complex M&A process in order to make more informed decisions. 

AlphaSense is a leading market intelligence platform designed to help you make deal decisions faster with the right information. In addition to saving you time and helping to streamline workflows with artificial intelligence (AI), AlphaSense provides access to exclusive and premium content from 10,000+ public and private data sources.

This combination of AI and premium, proprietary, public, and private content is instrumental in conducting effective due diligence, as it minimizes informational blind spots and helps identify red flags and potential risks before going too far with any deal. In the sections that follow, we’ll take an in-depth look at how AlphaSense enables you to conduct due diligence with confidence for every M&A deal that comes your way. 

M&A Due Diligence Pillars

Financial Reporting

Audited and unaudited financial statements are often reviewed for a particular look-back period (typically 3 and/or 5 years) to evaluate the performance, condition, and financial health of the firm. These reports also indicate cash flow, assets, liabilities, financing secured, and increasing or decreasing profitability.

With AlphaSense’s cutting-edge AI technology, you can accelerate the financial due diligence process by: 

  • Accessing Extensive Financial Information – Search a company’s ticker and run thematic searches across broker research and expert transcripts to quickly validate assumptions.
  • Performing Time Series Data Modeling – Filter by SEC filings to access income statements, balance sheets, and more, and then drill down to see and export QoQ data for trend analysis.
  • Extracting Key Performance Indicators (KPIs) – Filter by earnings calls and see KPIs highlighted in the panel. Click “Show History” to expand your view to all snippets related to that KPI over time.
  • Streamlining financial auditing and workflow with our Table Explorer feature – This feature allows you to generate a historical lookback of a company’s financial performance (broken out quarterly or annually), quickly spot seasonality, and further understand growth trajectory.

Operational Due Diligence 

This qualitative component offers a barometer into a firm’s operational function and examines the business model set forth against actual outcomes and whether a firm is on track with their long-term strategic direction. 

Quantitative insights and financial reporting offer one perspective into a firm’s financial health and viability. Understanding how a firm’s operating model is positioned for success should be a critical element in your due diligence checklist, but it cannot be done by looking at data alone. Assessing a firm’s key differentiators and offerings, while factoring in overall market sentiment, are key to this exercise as well.  

AlphaSense’s Smart Summaries feature leverages our 10+ years of AI development and language models to glean instant insights about trends at a particular company. Drawing from a premium content universe specifically curated for investment professionals, Smart Summaries generate insights across all four key perspectives: company documents, news, expert interview transcripts, and equity research.

Smart Summaries helps evaluate a firm’s operating model by providing:

  • An in-depth look at analyst upgrades and downgrades outlooks and broader market sentiment
  • Understanding what former employees, competitors, and channel partners are saying about the firm’s strengths, weaknesses, opportunities, and threats (SWOT analysis)
  • Future guidance on critical KPIs for the company

Unsure of what the most crucial questions are that you should be asking in your due diligence processes? Download our checklist, 5 Crucial Due Diligence Questions to Consider for PE, VC, and M&A Investors, to learn what you need to know before agreeing to a purchasing contract.

Commercial Due Diligence

To ensure a deal is on a successful track, you need to evaluate the target firm’s market presence and competitive positioning. This entails analyzing their total addressable market (TAM) and the tangible value of their products, services, and offerings.

It is also critical to assess the firm’s competitive positioning, what role they have in overall market share for their respective industry, what potential disruptors may exist, and where there are opportunities to capitalize post-acquisition or post-merger. This ultimately plays a prominent role in forecasting long-term growth trajectory.

Having the right tools to assess the market landscape and where a target company fits into the picture can potentially make or break a deal. The AlphaSense platform compiles millions of data points at the industry, watchlist, and document level to help you better track market landscape and industry trends, and identify disruptive players for a holistic view of the addressable market in question. 

Research that used to take hours or days is now available in seconds, and empowers you to surface the market intelligence you need in order to quickly and accurately gauge how a firm stacks up relative to its peers and within the market. 

AlphaSense Expert Insights are one powerful way to gain firsthand insights from industry experts who have actually spent time at an organization. Their first-hand insights are unparalleled when it comes to culture, leadership styles, internal motivations and challenges, and other intangible factors that affect deal success. 

This exclusive offering includes:

  • Expert Transcript Library – Dive into over 40,000 expert transcripts in our library to access proprietary insights from former executives, customers, competitors, and channel participants across a range of industries. Leverage our premium insights on thousands of public and private companies to create strategies that lead to successful M&A deals.
  • Expert Call Services – Gain access to more than one million pre-qualified expert profiles spanning all industries across the globe. Our Expert Call Services allow you to quickly and inexpensively connect with experts for customized interviews to fill in any research gaps in your M&A due diligence.

Furthermore, round out your research with an all-in-one market intelligence approach. Our extensive collection of broker research, earnings calls, filings, news reports, and more are all available within our platform to help you get a full 360-degree view on any company or market.

ESG Due Diligence

Perhaps the most continuously evolving component of the due diligence process is around ESG. With ongoing regulatory changes and heightened demand from key stakeholders and investors, companies are integrating sustainability principles into their corporate charters with little to no standardization or transparency. 

This presents a particularly risky scenario for an investor considering a company for an M&A transaction. With few vetted means to materially evaluate a company’s ESG claims, it is more important than ever to leverage the right resources for ESG due diligence to avoid misrepresentative claims, mitigate reputational risk, and confidently direct an M&A transaction to fruition.

The AlphaSense platform complements your ESG due diligence research and eliminates blind spots by pairing comprehensive content with key qualitative insights to help you quickly gain the full picture of a company’s sustainability practices. 

Across the four key perspectives of market research, AlphaSense aggregates the industry insights, ESG outlooks and scores, and evolving ESG policies and trends you rely on to round out your research process:  

  • Company – See how companies are reporting on their ESG initiatives and gain access to disclosures, documents, reports, and presentations covering 26,000+ companies 
  • Analyst – Hear from top analysts about ESG outlooks, company evaluations and trends
  • Journalist/Regulatory – Monitor regulatory and reporting groups such as GRI, as well as 145+ top ESG-focused news and trade journals 
  • Expert – Get access to 40,000+ first-hand perspectives of companies’ past executives, partners, and clients on ESG strategy, market leaders, and the overall landscape 

On the quantitative side, AlphaSense provides access to MSCI ratings, and you can also import additional ratings into the platform to complement your findings. AlphaSense’s customizable dashboards also allow you to proactively monitor the companies, industries, or trends that are most relevant to you.    

Human Capital Due Diligence

Often an overlooked and undervalued element in the due diligence process, having a pulse on the human element of an M&A transaction is critical for evaluating the oncoming leadership team and stratified talent, as well as understanding company culture, so as to ensure a smooth transition post-transaction.

In the short term, there can be risk of a significant talent casualty following a merger and/or acquisition. Longer-term, equally prominent risks of a poorly researched and implemented deal include employee disengagement, retention issues, reduction of productivity, internal conflict, and lingering tension among ranks and roles. Both sets of risks can single-handedly derail an otherwise well-audited transaction.

The cross-disciplinary features of the AlphaSense platform enable you to get firsthand briefings on a target firm’s pending structural changes, workforce modifications and executive leadership changes, expert and analyst overview, and sentiment analysis. A simple combination of search words generates the wealth of insights you need, in seconds. 

Taking your M&A Due Diligence to the Next Level

The M&A transaction process is fundamentally complex and nuanced with many twists and turns. The M&A due diligence process doesn’t need to be. 

AlphaSense’s powerful AI eliminates the guesswork of locating crucial information by quickly parsing through an extensive content universe of expert transcripts, broker research, financial documents, and more to pinpoint quality insights and metrics in seconds. 

Enhance and accelerate the depth and efficiency of your research with our innovative features:

  • Fast Navigation – Utilize AI-driven features like Smart Synonyms™ and sentiment analysis in the platform to quickly surface nuanced due diligence insights. These tools allow you to quickly find relevant documents based on your sentiment, making it easy to navigate across the four perspectives found in our vast content library.
  • Instant Insights – Leverage our generative AI to glean instant insights from any expert or earnings transcript with Smart Summaries. Smart Summaries is the only generative AI (genAI) tool that draws from a premium content universe specifically curated for investment professionals.
  • User-Friendly Interface – Stay informed in real-time with automated alerts and use custom search filters to surface documents relevant to your research. For expert transcripts, AlphaSense’s user-friendly platform offers timestamped audio, making your research process even more efficient.
  • Smart Search – Browse by expert title, company name, industry, topic and other smart search features, like our AI assistant, to discover nuanced insights that will fill in research gaps in your M&A strategy for a comprehensive understanding of your target company.
  • Enterprise Intelligence – Use AlphaSense Enterprise Intelligence which enables secure searches, summaries, and follow-up questions across your proprietary internal data and a vast repository of 300M+ premium external documents—all powered by our industry-leading AI for market intelligence.
  • Sentiment Analysis – Identify and quantify levels of emotion around specific research topics. Using a boolean operator, you can search for mentions of a specific topic in a positive, negative, or neutral light (for example, “acquisition” AND “positive”) and filter by relevant keyword.

Start your free trial today and accelerate your due diligence deal process.

Barbara Tague
Barbara Tague
Content Marketing Manager

Barb is a Content Marketing Manager covering the financial services segment at AlphaSense. Previously, she managed the content program at a global financial services firm.

Read all posts written by Barbara Tague