Buy-Side M&A: Diligence During the Deal

“A successful acquisition is built on more than just a handshake; it’s supported by the strength of your diligence pillars.”

Acquisitions don’t fail because buyers lack ambition. They fail because critical insights surface too late. Often, this happens after the purchase agreement is drafted, momentum has taken over, and assumptions hardened into deal terms that are difficult to unwind.

The most successful AEC transactions are not driven by speed alone. They are driven by clarity. This means total transparency regarding financial performance, tax exposure, talent depth, cultural fit, and the operational realities that determine whether value is preserved or eroded post-close.

That’s why executing an insight-driven deal during the acquisition process matters as much as the strategy that precedes it.

This blog explores how insight-driven diligence, applied in real time throughout the deal lifecycle, helps AEC buyers surface risk early, make better-informed decisions, and protect value long after the transaction closes.

Seeing the Deal Clearly from Day One

Every acquisition begins with a story: growth potential, geographic expansion, new service lines, or access to specialized talent. But stories are hypotheses, not conclusions. The role of diligence is to pressure-test those narratives early, before optimism outruns evidence.

For project-based firms, this challenge is amplified. Revenue models tied to long-term contracts, utilization variability, backlog quality, and people-centric value drivers make surface-level diligence insufficient. Buyers who rely on generic playbooks often miss risks that only become visible once integration begins.

An insight-driven approach reframes diligence from a checklist exercise into a decision-making tool. The goal isn’t just to confirm the purchase price; it’s to understand how the business actually works, what sustains its margins, and what could disrupt them post-close.

A Real-Time Roadmap Through the Deal Lifecycle

One of the most common buyer mistakes is treating diligence as a single phase rather than a progression. In reality, each stage of the deal demands different questions, deeper analysis, and increasingly specific insights.

From NDA to LOI, buyers should focus on identifying deal-breaking risks and validating high-level assumptions. As diligence advances, the emphasis shifts toward quantifying the impact of findings on valuation, working capital needs, integration cost, and leadership continuity.

Proper diligence will provide AEC leaders with a practical roadmap for navigating this progression so insights arrive when they can still influence outcomes.

AEC-Specific Financial Due Diligence That Goes Beyond the Numbers

Financial diligence in AEC deals requires more than verifying historical results. Revenue recognition policies, project margin variability, backlog conversion, and labor utilization all shape earnings quality in ways that are easy to misunderstand without industry context.

A Quality of Earnings (QoE) analysis is particularly critical. Buyers need to understand not only what normalized earnings were, but also how repeatable they are under new ownership. One-time project wins, deferred compensation practices, or under-investment in overhead can temporarily inflate profitability in the short-term, only to reverse post-close.

A QoE that evaluates financial integrity through an AEC lens helps buyers distinguish sustainable performance from temporary noise and avoid surprises that surface only after ownership changes hands.

Tax Structure and Compliance: Hidden Value or Hidden Risk

Tax diligence is often viewed as a defensive exercise, but in the architecture and engineering industry, it can materially influence value creation. Entity structure, multi-state nexus exposure, R&D credits, compensation-related tax issues, and accounting method differences, particularly where cash-basis firms must transition to accrual reporting post-close, all affect cash flow long after closing.

Misaligned tax structures can limit flexibility, increase effective tax rates, or complicate integration with existing platforms. Worse, unaddressed compliance issues can create contingent liabilities that shift risk to the buyer the moment the deal closes.

An insight-driven process identifies these issues early, quantifies exposure, and informs structuring decisions that align with the buyer’s long-term strategy rather than simply inheriting legacy constraints.

The People Side of the Deal: Where Value Is Won or Lost

In AEC acquisitions, people are not an asset class; they are the asset! Yet leadership capability, talent depth, and retention risk are often assessed informally, if at all.

Insight-driven buyers approach HR diligence with the same rigor as a financial review, using data to assess organizational resilience:

• Who truly holds client relationships?
• How dependent is revenue on a small group of senior leaders?
• Are compensation structures market-aligned, or do they mask potential risks?

Quantifying Risk to Make Better Decisions

Risk itself is not the enemy; unpriced risk is. The most sophisticated buyers don’t avoid complexity; they quantify it.

Understanding how identified risks affect valuation, earn-out structures, integration timelines, or working capital requirements enables better negotiations and smoother transitions. It also creates alignment between deal teams and operators, ensuring that expectations set during diligence carry through to execution.

The end goal of diligence is to connect diligence findings directly to deal economics, moving from “this could be an issue” to “this is how it affects value and what we should do about it.”

From Diligence to Durable Value

Ultimately, the purpose of diligence is not to slow deals down; it’s to make them stronger. When buyers execute insight-driven AEC deals, they close with confidence, integrate with intention, and protect the value they set out to acquire.

Join the conversation, During the Deal: Executing Insight-Driven AEC Deals,

SN’s expert panel will walk buyers through the acquisition lifecycle as it unfolds in real time. From the first NDA to final signatures, we will highlight where deals most often go sideways and how disciplined diligence can protect long-term value.

Our webinar is designed for buyers, investors, and corporate development leaders who want more than a clean close. It’s for those who want a clear view of the business they’re buying, the risks they’re assuming, and the levers that will drive success after day one.

Join us to learn how to run a structured, comprehensive due diligence process tailored specifically to AEC firms, understand the most common risk areas buyers encounter, and gain practical tools to assess financial integrity, tax compliance, and cultural compatibility, while there’s still time to act on what you learn.