Operational due diligence checks how a company actually runs before an acquisition. It tests assumptions about people, processes, systems, costs, and risks.
Operational due diligence (ODD) goes beyond financial due diligence to evaluate how a business actually runs. While financial DD verifies the numbers, operational DD verifies that the business can sustain and improve those numbers under new ownership.
Key areas of assessment include management team quality, technology infrastructure, customer concentration, process maturity, scalability of operations, regulatory compliance, and organizational culture. Each area produces a risk rating and a list of improvements needed.
The output of ODD directly feeds the value creation plan. If ODD reveals that the CRM is a spreadsheet, sales follow-up is inconsistent, and 40% of calls go to voicemail, those findings become value creation initiatives: implement CRM, standardize sales process, deploy AI receptionist.
ODD has become increasingly important as PE firms pay higher multiples. At 8 to 10x EBITDA, there is less room for error. Understanding operational risks before closing prevents overpaying and enables more accurate value creation modeling.
A meaningful share of PE deals fail to meet return targets because of operational issues that were never identified during due diligence. ODD catches problems like key-person dependency, technology debt, and process fragility before you write the check.
Skipping operational DD because financial DD looked clean
Only interviewing senior management without talking to frontline employees
Not assessing technology debt, which can require millions to fix post-acquisition
A value creation plan lists the changes a private equity owner expects to make to improve a portfolio company before exit.
A 100-day plan sets the first priorities, owners, and measures after an acquisition. The name describes the planning window, not a promise that every change will finish in 100 days.
Tech stack rationalization reviews a company's software, removes tools it does not need, and improves how the remaining systems share data.
Private equity portfolio operations is the work used to improve companies owned by a private equity firm. It may focus on costs, revenue, reporting, or preparation for a sale.
Financial DD validates the numbers (revenue, EBITDA, cash flow). Operational DD validates the business behind the numbers (team, processes, technology, scalability). Financial DD tells you what the company earns. Operational DD tells you if those earnings are sustainable.
Typically 3 to 6 weeks, running in parallel with financial and legal DD. It includes management interviews, site visits, technology assessment, process documentation review, and customer/vendor reference calls. Rushed ODD misses critical issues.
Tell us what is costing revenue or staff time. We will help you decide whether the problem is measurable and worth fixing.
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