Due Diligence is Broken

The ritual of rigor is medieval — and it’s no longer enough.

Financial Due Diligence (FDD) was born out of necessity. In a world of asymmetric information and transactional opacity, it was meant to serve as the bridge between risk and opportunity. A structured examination of a company's books, operations, and assumptions—ensuring that what you see is, indeed, what you get.

It worked. For a while.

But today, we must confront an uncomfortable truth: Financial due diligence, as it is currently practiced, is broken. Not because it lacks intent, but because it lacks evolution.

What is Due Diligence — and why do we need it?

At its core, due diligence is about validation. Legal, commercial, and operational assessments combine to give an investor, acquirer, or strategic partner the confidence that the deal they’re making rests on real foundations.

Financial due diligence, specifically, scrutinizes revenue quality, cost integrity, working capital behavior, compliance frameworks, and projections. It informs pricing, identifies risks, and outlines deal structures.

In short, FDD is the insurance policy on the deal thesis.

The Speed Paradox: Trust Must Be Fast, Not Just Thorough

In the age of high-stakes, high-velocity transactions—especially in tech, consumer, and D2C—speed has become as valuable as scrutiny.

Yet, ironically, the very process designed to accelerate confidence has become its biggest bottleneck. Most FDDs are slow, clunky, and unintentionally adversarial. They slow down closings, frustrate founders, and erode momentum.

And while diligence delays may not kill a deal, they certainly sap its energy. The window of opportunity doesn't wait for a 72-slide audit-style report. Especially not when markets, talent, and timing are all in motion.

Why is FDD still stuck in 2008?

Let’s focus on India, where much of this inertia is most visible.

FDDs here are almost exclusively conducted by the Big4s or their “Next4”. These firms house smart people with noble intentions—but they’re often operating under conditions and cultures that are frozen in time.

• Staffing models lean heavily on professionals from audit or accounting backgrounds. Many have spent years preparing for roles defined by statutory compliance—not strategic deal-craft.

• Tools of the trade are stuck in PowerPoint and Excel. These legacy formats aren’t just deliverables—they're the infrastructure. Data review processes are manually intensive, and the core tech stack is at best a shared drive and Outlook.

• Methodology begins with a checklist—ranging from 200 to 1,000 line items. Companies ("targets") are expected to gather, collate, and dump responses into a virtual "Dataroom."

• But here’s the kicker: These Datarooms aren’t intelligent. They aren’t crawled by AI. They aren’t indexed for pattern recognition. They’re scanned—line by line—by armies of undertrained analysts over weeks.

Once the first wave of data is sifted through, you’re met with… another list. “Queries.” Which prompt another round of data-gathering, and another cycle of weeks-long review.

Each round pulls the founder deeper into a bureaucratic vortex—pulling attention away from the business and into the theatre of process.

The Identity Crisis of Due Diligence Teams

Worse still, many diligence professionals forget what role they’re playing. They’re not independent auditors acting under a statutory mandate. They’re not compliance police.

They are, or should be, partners in the deal cycle—working to validate the future, not litigate the past.

Yet, we routinely see DD teams behaving as if they’re grading a final exam, rather than pressure-testing a thesis. This misalignment distorts priorities, bloats timelines, and weakens the utility of their final output.

What Financial Due Diligence Should Look Like

In a world increasingly powered by intelligent systems, it’s not unreasonable to expect:

• Smart Datarooms: Systems that auto-tag, cluster, and pattern-match documents against pre-trained risk libraries.

• Real-Time Dashboards: Where core metrics—EBITDA bridges, revenue cuts, margin variances—are parsed dynamically.

• Trained AI Agents: Capable of benchmarking against sector data, flagging outliers, and even drafting first-level red flags.

• Bespoke Playbooks: Custom DD frameworks driven by deal context, not generic checklists.
  

If underwriting a startup or scaling venture is about agility, then FDD must become an enabler, not a gatekeeper.

A Recommendation, Not a Reproach

This is not an attack on accounting professionals. Quite the contrary—many of them are among the most disciplined and detailed minds in the transaction ecosystem. But they’ve been handed an outdated playbook, and little incentive to rewrite it.

Our note to the industry is simple: evolve the process. Embrace the tech. Partner with dealmakers, not just data collectors.

Until Then, Choose Better Partners

Until the DD process itself becomes fast, smart, and truly strategic, companies should consider working with specialists who understand what’s at stake.

Firms like ours don’t just look at numbers—we represent your interests in the deal. We advocate, accelerate, and create clarity—while ensuring compliance and coverage.

Because your time is better spent building the business—not navigating an Excel maze.

Let’s fix due diligence—not just for the sake of speed, but for the quality of trust it was always meant to deliver.