Hidden Costs: Deals aren’t just won or lost on EBITDA multiples—they hinge on what’s concealed in the details.
Right now, the DOJ is currently investigating a 2022 acquisition of Mobileum, with H.I.G. Capital accusing Audax of fraudulently inflating the company’s financials before the sale—triggering a criminal probe amid heated lawsuits.
I guess allegedly getting snookered into overpaying by a quarter billion might get anyone’s dander up.
This case underscores our recent experience. In one cross-border middlemarket deal, what looked like an ideal opportunity unraveled under scrutiny:
The target’s supposed global footprint? Merely mail-drop addresses across two continents.
Fraud signals in the home country? Clear and unmistakable.
The outcome? After our investigation, the client to decided to walk away from an eightfigure deal—before it became an eightfigure mistake.
Here’s some of the things smart buyers are doing:
·Physical verification of claimed locations
·Intelligence gathering on both the company and its principals, including regulatory or reputational flags
·Reviewing historical and pending litigation, potential criminal filings, and industry specific regulatory actions
·Early detection of red flags—long before they impact valuation or post-close integration
Solid diligence is about more than numbers—it’s about knowing exactly who and what you’re buying.