Operational Due Diligence – A Critical Review Of Business Operations

Defining Operational Due Diligence Operational due diligence (ODD) is the process by which a potential purchaser reviews the operational aspects of a target company during mergers and acquisitions. An Operational Due Diligence review is often performed by a third party such as a professional services firm. Often the Operational Due Diligence is requested by the bank or other financier that is supporting the acquisition and is interested in the downside risks. Operational Due Diligence activities are often focused on analyzing the supply chain, engineering, and manufacturing operations of a target acquisition in detail.

Process of Operational Due Diligence:

  • The Operational Due Diligence review looks at the main operations of the target company.
  • Then they attempts to confirm that the business plan that has been provided is achievable with the existing operational facilities plus the capital expenditure that is outlined in the business plan.
  • Additionally the ODD review will consider whether there is the potential for additional value to be wrought out of the target company by improving its operational function and also whether there are serious operational risks about which the potential buyer should be concerned.
  • The approach for Operational Due Diligence varies by industry & accordingly the Due Diligence is planned.
  • An Operational Due Diligence review is often performed by a third party such as a professional services firm.