By John Paraskevas, Director, Etairos
Due diligence in a merger or acquisition (M&A) is usually thorough on the numbers. Financials, contracts, customer base, intellectual property and goodwill all get examined closely. When the target owns or occupies property, the physical asset often gets far less scrutiny. In our view that gap is where deals get expensive, and it is where technical due diligence in mergers and acquisitions earns its place.
The problem a balance sheet does not show
A building can look sound and still carry risk that never appears in a profit and loss statement. Deferred maintenance, ageing services approaching the end of their life such as HVAC plant, alterations carried out without approval, fire and cladding concerns, structural movement, contamination, or make good obligations on leases. None of these sit in the accounts. All of them can convert into capital you did not price into the deal. Mechanical services in particular is easy to overlook and expensive to replace once it fails.
Goodwill does not pay for a new roof
You may be paying a premium for a well run business. That premium says nothing about the condition of the asset housing it. A property valuation tells you what the asset is worth on the market. It does not tell you what condition it is in, what it will cost to keep it running, or whether it is suitable for your intended future use. Those are different questions, and only one of them shows up in most deals. If the property comes with a large unplanned spend attached, the value you thought you were buying quietly erodes on day one. You are not just acquiring a business and its goodwill. You may be acquiring a problem, and inheriting the cost of fixing it.
A stronger position for the advisers running the deal
Legal and financial due diligence answer most of the questions in a transaction. They do not cover the condition of the physical asset. For the lawyers and accountants guiding a client through an acquisition, technical due diligence closes that gap. It gives you a clear, objective read on the building so nothing material is left unexamined when your client signs. Etairos works alongside the legal and financial teams, not across them, reporting what the asset actually presents so the advice your client relies on is complete.
What technical due diligence adds in mergers and acquisitions
Technical due diligence is an objective, unconflicted assessment of the physical asset before you commit. Etairos scopes the investigation, engages and coordinates the right specialists, and reports the findings so decision makers understand condition, risk and likely cost exposure.
Two moments where it earns its place
Before you commit, so that findings can shape the price, the warranties you seek, or a decision to walk away.
Where the acquisition includes a plan to develop, refurbish or reposition the asset, a current condition snapshot gives the design team a factual starting point rather than assumptions.
Timing matters
Technical due diligence has to run inside the deal timetable. Bring it in early enough that what it surfaces can still influence the terms. Findings that arrive after settlement are no longer leverage. They are simply your new liability.
Etairos provides technical due diligence Australia wide.
If you are working through a merger or acquisition that involves property, contact Etairos to discuss technical due diligence before you commit. Call 1300 001 699 or email enquire@etairoscpp.com.au.
This article is general information only and does not constitute professional advice. Etairos recommends obtaining project specific guidance before making decisions.