The valuation gap, uncertain market conditions and other challenges faced by dealmakers call for risk mitigation measures. Such as extensive due diligence. The emphasis in such an audit is increasingly on commercial due diligence.

This is evident from the M&A Trend Survey Benelux 2024/2025 by M&A and Ansarada. For this research, 175 Dutch and Belgian M&A professionals took part in an online survey and the M&A editors interviewed 35 dealmakers live. The participants were asked which area, in addition to financial and legal due diligence, will become more important in the next 12 months.

In the 2023 Trend Survey by M&A and Ansarada, ESG due diligence ranked first with 44 percent of the votes, followed by commercial due diligence with 20 percent. However, this year, commercial due diligence – the investigation into the target's market position, customer base, competition, and growth potential – has emerged as the top priority.

This view is echoed by many of the experts interviewed by the editorial team, including Sergio Herrera, Managing Director of M&A at Rabobank: “Buyers are highly focused on the commercial aspect. They want a solid assessment of market trends, as this is also a basis for the business case. I see them seeking certainty in this area.”

Herrera’s point highlights why investors are increasingly placing value on commercial due diligence: the often turbulent market. While a thorough understanding of a target’s commercial viability has always been important, it was often more ‘nice to know’ than ‘need to know’. When commercial viability is threatened by various uncertainties, it becomes essential to conduct in-depth research. As Tom Snijckers, Partner at Oaklins, puts it: “Commercial due diligence is gaining importance due to fluctuating market conditions and economic instability. A strong commercial assessment to test expectations is then crucial.”

The security that commercial due diligence can provide – particularly insights into current and anticipated market position and revenue potential – is increasingly valued by investors. Joost den Engelsman, Head of Private Equity at law firm NautaDutilh, even speaks of a shift in investor mindset. “There is less tolerance for potential, unrealized growth. Investors want to see current results, and that’s something typically revealed through commercial and operational due diligence.” This may also explain why there’s little expectation for a rise in marketing & brand due diligence, as this type tends to focus more on long-term potential returns.

The trend survey also reveals that ESG due diligence is still considered as vital; nearly a quarter of the surveyed dealmakers ranked it as their top priority. Most experts interviewed by the M&A editorial team also expect its significance to increase over the coming years. They attribute this to stricter regulations and heightened stakeholder expectations, which drive the need for thorough analysis of a target’s environmental, social, and governance (ESG) performance.

ESG due diligence is no longer just a checklist, explains Jan-Hendrik Horsmeier, Partner at law firm Clifford Chance. “It’s not just about reporting but understanding the fundamental impact a company has on society and how it treats its people. Investors are far more aware of this now than they were 10 or 20 years ago. Back then, it didn’t matter much whether you were investing in cluster munitions or a daycare – as long as there was a good return. That’s becoming less and less the case.”

An investor who overlooks ESG risks could face severe financial consequences, such as fines for non-compliance with environmental regulations, reputational damage from poor labor conditions, or lost opportunities due to an inability to meet customers’ sustainability requirements. The primary goal of ESG due diligence is to identify such risks. “Risks that traditional financial and legal analyses may overlook”, says Sander Neeteson, Head of Corporate Finance at ABN AMRO. “With increasingly strict ESG laws and regulations, this is becoming more important. Companies that fail to prepare for CSRD reporting requirements pose a risk to themselves and the value chain they’re part of.”

A company with poor ESG practices will likely be seen as a less attractive acquisition target in the future. Conversely, a business that excels in ESG due diligence will have a clear advantage with investors, note Gülsüm Aslan and Rob Faasen, directors at insurer Risk Capital Advisors. “Buyers prefer acquiring a company that already has a solid ESG policy and is compliant or on track to become compliant.”

Research by the M&A Community and Ansarada among top dealmakers in the Benelux shows that over 16 percent of respondents view cybersecurity due diligence as the most important emerging focus area, following commercial and ESG due diligence.

This trend is no surprise. As digitalization progresses, ICT investments become more attractive. Simultaneously, the risk of damage from cybercrime is increasing, and privacy regulations now play a much larger role than in the past. CFOs consistently report cybersecurity as their top risk, and investors are also increasingly aware of the dangers. To accurately assess these risks, a thorough due diligence is essential, covering areas such as IT infrastructure (including network security and firewalls), software updates and patch management, data protection procedures and access control, incident response plans, and compliance with privacy laws like the GDPR.

“The impact of cyber and tech risks on the ability to create value is immense”, says Peter Zwijnenburg, Managing Director M&A and Transaction Solutions EMEA at Aon. Thus, cybersecurity due diligence is essential. “Unfortunately”, Zwijnenburg adds, “while there is some focus on cybersecurity, it is often superficial and tends to be routine. Attention is paid based on policies and protocols, but actual vulnerabilities are often overlooked. This is about to change!”

Other experts agree: a thorough cybersecurity due diligence not only reduces risks but also increases the likelihood of a successful acquisition. In a world where digital risks continue to grow, the importance of this process cannot be overstated.

For dealmakers, the message is clear: ignore cybersecurity due diligence at your own risk. A rigorous investigation into the digital resilience of an acquisition target is crucial for the success of modern M&A transactions.

Comprehensive due diligence is not the only way, nor even the primary way, to manage risks in mergers and acquisitions. However, it remains an indispensable tool – and one that is constantly evolving (read also the following chapter about the impact of artificial intelligence on the due diligence process). Traditional legal and financial due diligence is now joined by other vital forms.

Commercial due diligence, in particular, is expected to gain considerable popularity in the coming years, without displacing other essential types like ESG and cybersecurity due diligence, which also remain crucial.