Mental Barrier of Due Diligence

April 09, 2025

by a searcher from Northwestern University - Kellogg School of Management in Chicago, IL, USA

Hi All,

Any advice on getting past the mental barrier of a deal going south and then you are on the hook for the costs of due diligence? I think thats my biggest worry as I continue down this path of ETA. I remember my internship during my MBA where the searcher had one deal go south and he was on the hook for the due diligence. We ended up rolling it into the next deal, but still....not ideal.

Any suggestions on how you manage this or get past the mental barrier?

Ray

Reply by a professional
from Pace University in New York, NY, USA

Try to stagger your cost as much as possible. I typically tell my clients not to engage in my legal services including legal due diligence until they have begun and are at least 80% finished with due diligence. This way, they have not retained or paid for legal until they are very sure this is a business they want to move forward with. So, if after financial DD the deal goes south, they have only paid for some and not all DD. If you want to chat, you can reach me at redacted

Reply by a searcher
in Reno, NV, USA

I agree with many of the posters above. Do as much DD as you can before bringing in attorneys and accountants that will be charging for their time. At the end of the day, though, you are working on a risky venture. The money that you put into due diligence is worth it, even if the deal goes south. Better to spend $10k and walk away than spend $5MM on a bad deal.

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