Due Diligence in Investment: Why Vetting C-level Executives and Companies Is Critical for Protection
Most bad deals do not explode on day one; they unravel when something you thought you knew proves wrong. A contract is signed, the market shifts, a name in the leadership team attracts the wrong attention, and value starts to leak. Due diligence stops that becoming your story. It is a safeguard, not a ritual.
Due diligence tests claims against facts. It checks the numbers, the legal position and the people who will run the business once your capital is committed. The aim is to reduce uncertainty, surface material risks and decide with a clear head. In practice it means scrutinising financial statements and cash flow, confirming licences, regulatory standing and litigation, and examining the reputation and history of key individuals. Done well, it reveals what a slide deck will not.
Numbers are only part of the story. Companies succeed or fail because of the choices of a small group of people. Scrutiny of C-level executives deserves as much attention as the balance sheet. What have they built before and how did they behave under pressure? Are there conflicts of interest? Do public statements match the record? What do former colleagues say? High-profile failures, from blood-testing start-ups to crypto exchanges, show how charisma can mask weak governance. Warning signs often exist; they matter only if someone looks.
When diligence is rushed, the results are familiar: fines and lawsuits that should have been foreseen; revenue flattered, liabilities downplayed or assets overvalued; reputations damaged by association; operations that falter because cultures clash or key people are not what they seemed. This is not bad luck. It is the cost of skipping awkward questions.
This discipline is not only for private equity or mergers and acquisitions. Any organisation that relies on third parties needs it. A construction firm must be confident in a subcontractor’s safety record and delivery history. A hospital must ensure suppliers meet clinical and ethical standards. A software business should test a vendor’s security, data handling and code provenance before access is granted. Public bodies have a duty to confirm the integrity and capability of contractors before public money is committed. The principle is the same: know who you are dealing with before their risks become yours.
A strong diligence programme is practical. Start with people: run background checks on executives, including civil, criminal and regulatory history, verified employment and education, and a review of media coverage. Test the company: read the accounts with a sceptical eye, review credit and tax positions, examine revenue-driving contracts and contingent liabilities. Listen for reputation: scan industry commentary, stakeholder views and employee feedback. Verify claims independently: speak to customers and suppliers, confirm licences with issuing bodies and request the data behind headline numbers. Bring in specialists when exposure is material, whether forensic accounting, cyber, IP or sector expertise. The point is to replace assumption with evidence.
A few habits raise the bar. Ask for primary documents, not summaries. Track unanswered questions and treat reluctance to share information as a signal. Compare what you hear in management meetings with records and third-party sources. Write down risks you will accept and those you will not, then test the deal against that list before momentum takes over. If the case still stands, proceed with confidence. If it does not, walk away.
On paper many opportunities look compelling. The work is to confirm that facts match the promise and that the people behind the numbers can be trusted with your capital. That is what rigorous due diligence delivers.
Conflict International provides independent, confidential due diligence reporting for investors, companies and counsel. We combine documentary review and public‑record research with discreet human enquiries to give you a clear, defensible view of risk. Whether you need a rapid red‑flag screen or a deep dive on leadership and counterparties, we build a programme that fits your timetable and exposure.
If you would like to discuss a live transaction or an upcoming partnership, start a confidential conversation or learn more about our approach here.
Written by Michael Tapling, VP of US Operations at Conflict International