Due Diligence in M&A
Don't Buy a Business with Your Eyes Closed

Published: 13 July 2026

Buying a business is one of the biggest investments a company can make. Whether it is acquiring a competitor, expanding into a new market or purchasing a family-owned business, every acquisition comes with opportunities and risks.

Many buyers spend months negotiating the purchase price but only a fraction of the time understanding what they are actually buying.

This is where due diligence comes in.

Think of buying a business like buying a house. You may like the location, the layout and the asking price, but you would still engage a professional to inspect the property before signing the Sale and Purchase Agreement. No one wants to discover leaking pipes, termite damage or structural cracks after moving in.

Buying a business is no different.

On paper, the financial statements may look healthy. Revenue may be growing, profits may be increasing and everything may seem to be in order. However, the real questions are:

• Are those profits sustainable?
• Are there hidden tax exposures?
• Is the company relying on one major customer?
• Are there legal issues waiting to surface?
• Will the business continue performing after the current owner leaves?

These are questions that financial statements alone cannot answer.

The purpose of due diligence is not to find fault with the business. It is to help buyers understand exactly what they are buying so they can make informed decisions and avoid unpleasant surprises later.

More Than Just Checking the Numbers

Many people think due diligence is simply reviewing financial statements.

In reality, it is about understanding the story behind the numbers.

For example, a company may report RM10 million in profit. That sounds impressive, but what if RM3 million came from selling a piece of land? Or what if another RM2 million came from a customer that has no intention of renewing its contract next year?

The business is still profitable, but its future earnings may look very different.

A proper due diligence exercise separates one-off events from recurring business performance, allowing buyers to understand what they are really paying for.

"Can't My Finance Team Do It?"

This is probably one of the questions we hear most often.

The answer is yes, they certainly play an important role.

Your finance team knows your business better than anyone else. They understand your operations, your industry and your strategic goals. Their input is invaluable throughout the acquisition process.

However, due diligence requires looking at the target company from a different perspective.

Your finance team is naturally focused on making the deal work. Professional advisers are engaged to challenge assumptions, verify information and ask the difficult questions that others may overlook.

Sometimes, being too familiar with a situation can make it harder to spot potential issues. As the saying goes, "You can't see the forest for the trees." An independent set of eyes often notices things that others miss.

Experience Makes a Difference

Most companies only acquire another business once every few years.

Professional advisers may be involved in dozens of transactions every year.

That experience matters.

Over time, we begin to notice recurring patterns.

We've seen companies whose profits looked strong until we discovered they were driven by one-off income.

We've seen businesses that appeared financially healthy but relied on a single customer for more than half of their revenue.

We've seen acquisitions where the biggest issue wasn't profit at all, it was unpaid taxes, weak internal controls or outdated IT systems that required significant investment after completion.

These issues are not always obvious. Knowing where to look often comes from experience.

Due Diligence Can Save More Than It Costs

Some business owners see due diligence as another professional fee that increases the cost of the transaction.

In reality, it often saves far more than it costs.

Imagine discovering during due diligence that the target company requires an additional RM5 million in working capital after the acquisition. Or finding out that a major tax audit is still unresolved.

With that information, the buyer can renegotiate the purchase price, request additional warranties or restructure the deal.

Without that information, the buyer inherits the problem after completion.

In many cases, a thorough due diligence exercise pays for itself through better negotiations and better decision-making.

The Best Results Come from Working Together

Due diligence is not about proving that management is wrong or that the finance team has missed something.

It is about bringing different perspectives together.

Your internal finance team contributes valuable knowledge about your business strategy, operations and objectives.

Professional advisers contribute independence, transaction experience and a fresh perspective gained from working on similar deals across different industries.

When these strengths are combined, management gains a much clearer picture of the target business, not only its opportunities, but also the risks that need to be managed.

Final Thoughts

Every business has issues. The objective of due diligence is not to find a perfect company—because one simply does not exist.

The real objective is to understand the risks before you commit to the investment.

A good acquisition is not one with no issues. It is one where the buyer understands those issues, prices them appropriately and has a plan to manage them.

After all, buying a business isn't just about getting the deal done. It's about making sure it's the right deal.

How YYC Can Help

YYC's Corporate Advisory team helps buyers look past the financial statements before they commit, from financial and tax due diligence to deal structuring and price negotiation. Speak to our team to understand exactly what you are buying.