Richard spent 7 months negotiating to acquire a logistics company for $18M. Term sheet signed. Lawyers engaged. Press release drafted.
The deal died on day 4 of due diligence.
They found:
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$2.7M in customer contracts that were month-to-month (he thought they were 3-year agreements)
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$890K in pending litigation the seller “forgot” to mention
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$1.4M in revenue from one customer who’d already notified they were leaving
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Equipment valued at $3.2M that was actually worth $1.1M after proper appraisal
Richard walked away from the deal, having spent $340K on legal and accounting fees.
The 40% That Explode
Harvard Business School studied 2,100 M&A transactions. 40% died during due diligence after terms were agreed. Not because buyers got cold feet—because they discovered the asset they agreed to buy didn’t actually exist.
The pattern is consistent:
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Revenue recognized improperly (pulling future revenue into current)
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Customer concentration hidden (80% of revenue from 3 customers)
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Pending litigation “overlooked” (lawsuits in discovery phase)
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Intellectual property not actually owned (licensed, not owned)
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Tax liabilities understated ($X owed to IRS, not disclosed
Of the 60% that close, another 20% destroy value because issues are found post-close.
That’s 52% of M&A transactions that either fail or fail to deliver because due diligence was inadequate.
What $100M Deals Do Differently
When Vista Equity buys a software company for $100M+, they don’t trust the seller’s financials. They run a 347-point due diligence checklist across:
Financial Due Diligence:
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Revenue quality (recurring vs. one-time, concentration, churn)
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Working capital needs (often higher post-acquisition)
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EBITDA adjustments (add-backs that aren’t really add-backs)
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Cap table complexity (who actually owns what)
Legal Due Diligence:
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Customer contracts (term, auto-renewal, termination rights)
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Employee agreements (non-competes, IP assignment)
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Litigation (pending, threatened, or reasonably expected)
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Intellectual property (patents, trademarks, copyrights—owned or licensed?)
Operational Due Diligence:
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Customer concentration and cohort analysis
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Technology stack and technical debt
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Key person dependencies
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Integration complexity
Commercial Due Diligence:
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Market position and competitive threats
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Customer satisfaction and likely churn
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Pipeline quality and sales productivity
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Product roadmap viability
They find deal-breaking issues 73% of the time. That’s why they’re selective.
The $4.7M Mistake Pattern
Jennifer wanted to acquire a competitor for $8M. It would double her revenue overnight. She hired a CPA to review the financials (cost: $12K).
The CPA said the numbers “looked reasonable.”
AI BIZ GURU’s MAD Agent found 23 red flags the CPA missed:
Critical Issues:
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$1.8M in revenue from top customer who’d already issued RFP to competitors
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$940K in deferred revenue that would require product delivery post-close (liability, not asset)
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Founder’s brother-in-law on payroll at $180K (never shows up, would need to be terminated)
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Software “owned” was actually licensed (source code not transferable)
Deal value adjusted from $8M to $4.7M after proper diligence.
The CPA wasn’t wrong—the numbers did tie out. But CPAs verify historical accuracy. Due diligence assesses future risk.
How AI BIZ GURU’s MAD Agent Works
The M&A Due Diligence Agent doesn’t just review financials. It runs the same 347-point institutional checklist that investment banks use on middle-market deals.
It analyzes:
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Three years of financials for quality of earnings
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Revenue contracts for concentration and cancellation risk
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Customer cohorts for retention and expansion patterns
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Legal documents for litigation risk and IP ownership
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Employee census for key person and compensation issues
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Technology assets for ownership and technical debt
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Market position for competitive sustainability
It identifies:
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Revenue at risk from customer concentration or term issues
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EBITDA adjustments that inflate actual earning power
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Working capital needs post-acquisition (always higher than expected)
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Litigation exposure from pending or threatened legal matters
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IP that’s licensed not owned (deal killer for tech companies)
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Integration risks that will cost $X to resolve
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Cultural fit issues that destroy post-merger value
It delivers:
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347-point due diligence report with red/yellow/green flags
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Valuation adjustment recommendations based on findings
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Integration risk assessment and cost estimate
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Deal terms modification suggestions based on risk
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Walk-away recommendation if issues are material
It prevents:
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Buying revenue that won’t survive the acquisition
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Overpaying for a business with hidden liabilities
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Acquiring legal problems disguised as assets
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Integration disasters from undiscovered issues
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Post-close disputes about what was actually purchased
The Real Cost of Incomplete Due Diligence
Marcus bought a B2B services company. Post-close he discovered:
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Lead salesperson (40% of revenue) had non-compete that was unenforceable
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She left immediately, taking 8 clients with her
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Revenue dropped 43% in 120 days
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He paid $6.4M for a company now worth $3.1M
Cost of inadequate due diligence: $3.3 million
Tom used the MAD Agent before closing. It found:
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$1.2M in revenue from government contracts requiring security clearance
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Seller’s clearance was personal, non-transferable
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Contracts would be rebid post-acquisition with no guarantee of renewal
Tom renegotiated from $9M to $6.8M or walked away.
Value saved: $2.2 million
The Due Diligence Timeline
Traditional M&A Due Diligence:
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Investment bank: 8-12 weeks, $150K-$300K
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Law firm: 6-10 weeks, $80K-$200K
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Accounting firm: 4-6 weeks, $50K-$120K
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Total: 18-28 weeks, $280K-$620K
AI BIZ GURU MAD Agent:
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Complete 347-point analysis: 72 hours
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Cost: Fraction of traditional diligence
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Deliverable: Full report with red flags prioritized by materiality
Does it replace lawyers and accountants? No—but it finds the issues they need to investigate, saving 60-70% of their time and your money.
The AI BIZ GURU Difference
The MAD Agent has analyzed thousands of M&A transactions. It knows what deal-killers look like across every industry.
Upload:
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Target company financials (3 years minimum)
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Customer contracts and revenue schedule
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Employee census and key person documentation
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Legal documents (articles, IP registrations, litigation)
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Technology documentation and architecture
Get:
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347-point due diligence report
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Critical issues prioritized by impact
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Valuation adjustment recommendations
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Integration risk assessment
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Walk-away or proceed recommendation