What sourcing diligence finds that financial diligence misses
Supplier risk rarely shows up in the data room. Here is where to look before you sign, and why it matters for the value creation plan.
Financial due diligence tells you what a business has earned. It says much less about whether the supply base can keep delivering those earnings once ownership changes, volumes grow, or a key supplier decides to renegotiate.
In our experience the largest surprises after close sit in three places: concentration that nobody mapped, contracts that do not say what management believes they say, and supplier capability that was assumed rather than verified.
Concentration hides in the long tail
Spend cubes show the top suppliers clearly. What they rarely show is that several smaller suppliers depend on the same sub-tier source, or that a critical component is qualified at only one plant. A short, structured walk through the bill of materials usually surfaces exposures that no spend report will.
Contracts are an asset, or a liability
Change-of-control clauses, pricing indexation and minimum volume commitments can all shift value between buyer and supplier the moment the deal completes. Reviewing a focused sample of critical contracts early gives the deal team leverage while it still matters.
The best time to find a supply base problem is before it has been priced into the deal.
From findings to a 100-day plan
Good sourcing diligence does not stop at risk. It quantifies the savings and resilience opportunities by category, sets out which can be captured in the first hundred days, and names the owners. That turns a diligence report into the first chapter of the value creation plan.
