Philippe Jabre is the founder, CIO and CEO of Jabre Capital Partners, a multi-family office and independent wealth management company based in Geneva, Switzerland. This article will look at due diligence and the steps taken by private equity firms to mitigate uncertainty and invest with greater confidence.
In an ultra-competitive private equity industry with an increasingly constricting credit market, it is more challenging than ever to generate strong returns. Shorter timelines to close, increasing seller expectations and the return pressure created by high multiples mean that a stringent diligence and post-close planning process are integral to generating high returns.
Appropriate, tailored due diligence provides private equity firms with an exhaustive understanding of the target company, revealing vital data on its financial performance, customer relationships and market strength and better equipping them to close a deal at a favourable price. The embedded infographic contains some eye-opening statistics on US business deals in 2025.
Due diligence informs private equity firms on whether a deal is worth pursuing or whether it is time to walk away. With the average private equity firm evaluating 80 deals prior to investing in a single company, it is essential that the due diligence process is conducted as comprehensively and expeditiously as possible. Once a potentially good deal has been identified, due diligence is undertaken to gain a better understanding of the company’s fundamentals, exploring everything from IT and operational processes to legal aspects and the company’s financials. It is crucial for private equity firms to put in place robust processes for this complex task to manage risks when investing in privately held companies.
Financial due diligence enables investors to assess a company’s capabilities, providing an overview of its position in the marketplace and noting trends that could potentially impact its performance. It explores various systems and processes such as cash management controls, inventory costing and valuation, and collectability of accounts receivable. Tax due diligence is also necessary to ensure the achievability of long-term tax objectives.
Operational due diligence explores an enterprise’s day-to-day mechanics to determine whether it can support post-investment growth. This includes assessing operational efficiency, production capacity and the stability of supply chains. Private equity firms will also review technology infrastructure and cybersecurity protocols to ensure the company can operate securely and scale efficiently. Legal due diligence, on the other hand, centres around verifying the corporate structure, ownership records and shareholder agreement to ensure clear, undisputed control. The embedded video takes a closer look at business structure, providing an overview of the most popular types.
