By the time you sign, the acquisition due diligence checklist has been worked hard. Quality of earnings, working capital, contingent liabilities, customer contracts, tax, all picked over by people who are very good at picking things over and bill accordingly.
What gets far less attention is the world the target sells into. A data room looks backward. That's what it's for. It can't tell you about the rule proposed last month, the competitor that just bought a supplier, or the tariff that took effect the week before you signed. Most of that is sitting in public filings and on agency websites, and a deal team buried in the data room rarely gets around to looking.
Three recent examples
Supplier ownership. On September 8, GE Aerospace agreed to buy Consolidated Precision Products, which makes castings for jet engines and industrial gas turbines, for $11.75 billion. GE has been a CPP customer for more than fifteen years, describes the deal as a way to add capacity, and expects to close in the second half of 2027. Now suppose you're buying a precision parts company that depends on CPP castings. Its most important supplier is about to belong to one of the biggest engine makers in the world. That could be fine. It could also mean allocation goes to the parent first. Either way I'd want to have asked before signing rather than after.
Trade. The same day, Canada's retaliatory tariffs took effect on C$27.6 billion of U.S. goods, with 50% duties on a long list of steel and aluminum products and 25% on derivatives. For a target that exports to Canada, the trailing twelve months may no longer describe next year, and a quality of earnings report won't flag it because it isn't in the numbers yet.
Regulation. In July the EPA proposed changes to the 2027 heavy-duty engine rules, including the warranty and useful-life periods. If you're buying a truck components supplier whose recent revenue got a lift from fleets buying ahead of the 2027 rules, the case for that demand depends on which version of the rule ends up final.
Why the data room can't show you this
Every document in a data room describes something that already happened. Management will tell you about the market, and most of them will describe it in good faith, but they're describing it from inside the company, in the middle of a sale. Nobody in the process is paid to read the competitors' 8-Ks, the proposed rules in the target's industry and the ownership news about its key suppliers, so mostly nobody does.
The market section to add to your due diligence checklist
Give it its own section and its own owner:
- Regulation: proposed or pending rules that would take effect in your first two years of ownership, each with a rough cost.
- Competitors: the last twelve months of their acquisitions, capacity additions, cost programs and pricing moves.
- Suppliers: ownership changes and concentration, plus who else is buying from the same source.
- Customers: what the target's largest customers have said publicly about their own demand and guidance.
- Trade and inputs: tariff exposure by product and country of origin, plus any hedges or fixed-price contracts that roll off after close.
One test while you work through it: pretend you already own the company, and ask what a briefing written for its CFO would say this week. If that briefing would hold surprises, you're about to pay for them at whatever multiple you agreed to.
When to run it, and what to do with what you find
Earlier than feels natural. Most buyers start market work after the LOI, during exclusivity, when the clock is running and the team is deep in the data room. A first pass before the LOI, even a rough one, is worth the extra week, because that's when a finding can still move the price without anyone feeling ambushed.
Then decide what each finding is worth in the documents. Some belong in the price. Some are better handled with a specific rep, an escrow, or an earnout tied to how a rule or tariff lands, so you aren't paying today for a risk that may never show up. And some are just things the new owner needs to know on day one, which makes them the start of your first hundred days rather than a negotiating point. Your deal counsel will have views on which is which. What helps them is getting sourced findings early enough to have that conversation at all.
It cuts both ways at the table
Buffett wrote in his 2008 letter that Ben Graham taught him price is what you pay and value is what you get, and a good share of the gap between the two lives in the market around the target. A sourced case that the target's market is tightening supports a price conversation far better than a general feeling of caution does. And when the outside picture turns out to be good, that's worth just as much. It gives you the nerve to move while the other bidders are still hedging.
If you'd rather have that outside view done for you, a one-time briefing on a target company is $149 with no subscription. For the inside of the story, the questions a CFO would ask about supplier trouble apply here too.
CFOmarketIQ will also run a first briefing on your own company for free, if you'd like to see the format before pointing it at a target.
Questions CFOs ask about acquisition due diligence
What should an acquisition due diligence checklist include?
The usual core is financial (quality of earnings, working capital, debt), legal (contracts, litigation, IP), tax, operations and people. The section most checklists underweight is the market: regulation heading toward the target, what competitors are doing, who owns the key suppliers, what the biggest customers are saying about demand, and trade exposure. Those look forward, and a data room can't.
What is commercial due diligence?
A review of the target's market position and outlook rather than its accounts: demand in its end markets, how it stacks up against competitors, whether it can hold price, and the growth assumptions behind the valuation. Large deals often hire a firm for it. On mid market deals it's often skipped or reduced to the management presentation, and that's where a lot of post-close surprises come from.
What's the difference between commercial and financial due diligence?
Financial due diligence tests whether the historical numbers are real and repeatable. Commercial due diligence asks whether the market will let those numbers continue. You want both, because a clean quality of earnings report on a business whose market is about to shift is still describing a year that may not repeat.
A note on all of this: it is general information, not financial, legal or tax advice. Run anything you plan to act on past your own advisors first.