Operational due diligence: what the buyer reviews beyond the numbers

The buyer’s due diligence is not limited to financials and contracts. It includes operational diligence: how the business runs day to day, who makes decisions, how revenue depends on key customers and suppliers, and what happens if the owner leaves. In a Mexican SME these factors are often as important as the numbers. This note describes what the buyer reviews on the operational side and how to prepare.

What areas does operational due diligence cover?

The buyer reviews at least four areas in addition to financial and legal:

• Customer and supplier concentration. What share of revenue or costs depends on a few players. High customer concentration lowers the multiple the buyer is willing to pay and can lead to closing conditions or price adjustments. The seller who documents contracts, history, and diversification plans mitigates perceived risk.

• Owner dependence. If sales, relationships with key accounts, or operating decisions depend on one or two people, the buyer assumes value can erode after closing. They review real org charts, delegation of tasks, and retention or transition plans. An explicit “how we do things here” and contracts with key customers help.

• Systems, processes, and documentation. How sales, purchasing, and production are recorded; whether there are manuals or procedures; whether information lives in the owner’s head or in replicable systems. An operational data room — flows, owners, backups — speeds diligence and signals order.

• Continuity risks. Contracts with change-of-control clauses, key employees without contracts or on special terms, dependence on a single site or critical supplier. The buyer wants to know what can break or be renegotiated after closing.

How does the seller prepare for operational diligence?

Before opening the data room, the seller can do the following:

1. Document the real decision structure and key operational flows.

2. Gather contracts with the five to ten most important customers and suppliers and review change-of-control clauses.

3. Prepare a concentration summary (revenue share by customer, by product) with data the buyer will ask for anyway.

4. Describe in the CIM the owner's role and transition plans.

The guide to preparing the data room and the customer concentration checklist give structure for this preparation.

What operational findings typically affect price or conditions?

Findings that often translate into price adjustment or closing conditions: extreme concentration (e.g. more than 40% of revenue from one customer) without a long-term contract; owner dependence in sales or relationships with no transition plan; critical processes with no documentation; or change-of-control clauses that let the customer or supplier terminate or renegotiate. The seller who identifies and discloses these in the CIM and documents them in the data room reduces the chance the buyer uses them as a surprise to cut price or impose last-minute conditions.