By Lígia Sodré – Partner, Transaction Services at MCS Markup
Over the years, the M&A environment has become increasingly dynamic and competitive, with faster processes and investors placing greater demands on asset quality and the consistency of investment theses. In this context, a key differentiator has emerged: the ability to extract from available information what truly drives value in a transaction.
It is within this landscape that due diligence takes center stage. More than a technical step in the process, it has become one of the primary tools for understanding the target and guiding negotiations.
In general terms, due diligence involves the analysis of financial, tax, labor, legal, operational, and even strategic aspects of a company, with the objective of mapping risks, validating financial assumptions, and identifying opportunities. However, over time, due diligence has evolved—going beyond merely avoiding surprises to delivering value-driven insights that support transaction decisions.
Today, a modern diligence approach is not limited to identifying liabilities. Recognizing value creation opportunities is equally important. Operational synergies, efficiency gains, tax structure optimization, and governance enhancements can all be identified and reflected in negotiations, contributing to a more comprehensive view of the transaction.
Experience shows that the most critical issues are not always the most obvious. Value creation—or erosion—is often linked to a combination of factors, such as earnings quality, revenue recurrence, margin sustainability, leverage levels (which have become particularly prominent in the Brazilian market), and exposure to significant yet unmaterialized tax or labor risks.
In addition, how the process is conducted is a determining factor. Overly extensive or unfocused diligence efforts tend to create friction between parties. Conversely, relevance-driven approaches—focused on matters that genuinely impact value—make the process more efficient and foster more productive discussions.
This is not merely about identifying risks or inconsistencies, but about understanding their economic implications and their impact on transaction agreements, while maintaining continuous interaction with legal counsel and financial advisors involved in the deal. A multidisciplinary team working in close coordination ensures that issues are anticipated and that conclusions effectively support price adjustments and define appropriate protection mechanisms for the client.
In this way, value is built throughout the M&A process—and when properly executed, due diligence is one of the most powerful tools to achieve it.
