Due diligence

Definition

The phase between LOI and closing where the price gets checked.

Why It Matters

Deals die here more than anywhere else; the discipline is sequencing it tightly and reacting to findings with proposals, not panic. What turns up decides three things: whether you close at all, whether the price holds or gets renegotiated, and which problems you inherit knowingly rather than by surprise. The spending is real and mostly non-refundable, so the order of work matters, with the cheap tests that could kill the deal run before the expensive ones.

In numbers: On a $1,000,000 deal, a buyer might spend $15,000 to $30,000 across a QoE, legal review, and insurance checks, figures assembled from the vendors' own published pricing; finding that a third of revenue came from one customer who just left is what makes that the cheapest money in the deal.