On smaller deals, searchers should focus their lawyers on drafting a comprehensive purchase agreement. Small companies typically have incomplete records. Even thorough diligence will fail to eliminate all risks relating to undisclosed liabilities. A strong purchase agreement can protect you against these unknown unknowns.

That does not mean, however, that diligence does not matter. A case in point: When recently conducting diligence, a client came across several undisclosed phantom stock agreements, material in amount.

Right-size your diligence based on the complexity of the target company and your appetite for risk. But do so with commitment and care. Caveat emptor.