In the rush to move from pre-LOI to close, many investors overlook marketing due diligence. But should you skip marketing due diligence—or is it a costly oversight?
When evaluating if a company is a commercially viable investment, if you don't review its marketing function, you could easily end up with inaccurate projections and inflated valuations. This will jeopardize your investment’s potential returns.
Conducting marketing due diligence will get you critical information that can save you from significant financial losses. We’ve worked on countless projects with leading Private Equity firms where marketing due diligence insights helped them walk away from deals that would have resulted in millions of dollars in losses.
Here are the top reasons why you should not skip marketing due diligence.
Gain clarity on the marketing budget needed to hit revenue targets
Steady growth requires a strong marketing engine because your sales teams can’t close more deals without a solid pipeline of high-quality marketing-qualified leads (MQLs). But you can't generate these MQLs without the right level of marketing investment—something that's often underestimated. In fact, a well-executed marketing strategy with the right budget can lead to sustainable, scalable and predictable growth.
Marketing due diligence uncovers the data you need to see if the target company can generate enough quality MQLs to meet its revenue targets while staying within the planned marketing budget. It’ll help you avoid investing in a company where you might have to inject unexpected capital post-acquisition to meet growth projections—which means cutting into profitability, ROI and ultimately, EBITDA margins.
Find channels that can scale and deliver long-term growth
It's common for companies to appear to have strong top-line growth, but that growth can be misleading when it's driven by marketing channels that are unsustainable or too expensive to scale. You don't want to burn through your marketing budget on underperforming channels post-acquisition without delivering the results needed to meet growth expectations.
Marketing due diligence involves analyzing the performance and scalability of each channel, which means it’ll uncover risks that save you from investing in companies or channels that won't bring you the growth you need. Examining traffic sources, lead quality, conversion rates and customer acquisition cost (CAC) per channel will help you identify channels that are nearing saturation or have diminishing returns. It also gives you visibility into the long-term viability and scalability of each channel so you can allocate spend where it will have the greatest impact.
Ground your investment thesis in real growth drivers
A compelling investment thesis is only as strong as the data it's built on. It’s grounded in accurate market and customer insights into your target company, with an understanding of its biggest opportunities. Without clear insight into its customer acquisition trends, market positioning and competitive advantages, your investment thesis may overestimate growth levers—or worse, focus on the wrong ones.
Marketing due diligence provides the strategic intelligence needed to validate (or refine) your thesis. By analyzing customer demographics, buying behavior, market share, competitive activity and broader market trends, you'll reveal both hidden opportunities and/or significant threats. This ensures your thesis isn’t built on outdated assumptions or overlooking key growth drivers that actually drive results.
Operationalize value creation in the first 100 days
The first 100 days post-close are critical—this is when momentum matters most. You don't want to spend these early months figuring out where to start with quick wins instead of executing on high-impact opportunities and starting to add value as soon as the deal closes.
Marketing due diligence eliminates lag during this critical time. Armed with the target company’s marketing infrastructure, campaigns and performance metrics, you'll be in a strong position to smoothly transition to optimization by identifying quick wins and areas for improvement, building an immediate action plan and executing confidently right away
Uncover high-growth potential others miss
Not every underperforming company is a poor investment. In fact, many businesses that investors dismiss as stagnant can become high-growth performers and significantly increase their enterprise value with small but strategic changes—such as refining messaging, reallocating spend or unlocking new channels.
Without marketing due diligence, these high-potential opportunities go unnoticed. Diving into the data behind the company’s go-to-market engine reveals hidden untapped growth opportunities that can significantly increase enterprise value post-acquisition. This means you're not just avoiding bad deals, you're also identifying undervalued assets with the potential for outsized returns.
Skipping marketing due diligence might save time in the short term—but it can cost millions in missed opportunities and lost value down the line. When done right, marketing due diligence is a competitive advantage that empowers you to de-risk investments, validate your strategy, accelerate value creation and uncover growth where others see risk.
If you're looking to build a more reliable, scalable due diligence process, see how you can get instant, data-driven marketing due diligence reports with Inquisio. Start your free trial now.
