A penny saved is a penny earned. But one penny saved on diligence jeopardizes the 99 others that needn’t have been put at risk at all.
The most successful investments begin with a bullet-proof thesis that considers both likely risk and potential value. Competition for deals is heating up, especially in foodservice where valuation multiplies can sit at 10x EBITDA and higher. This intensity might motivate some dealmakers to take an expedited path to closing, but a diligence process that surfaces red flags and identifies value-accretive actions is more necessary than ever.
The sophisticated nature of most restaurant and hotel food and beverage operations, which combine all the challenges of the retail sector with the complexities of manufacturing, logistics, and increasingly, technology, makes properly assessing investment targets more difficult — and more essential.
Without specialized knowledge of how consumers and the market are moving, a general due diligence assessment may remain focused solely on the top and bottom lines, rather than surfacing the factors that really drive performance.