M&A may look like a question of “how much should we pay?” In practice, however, the more important question is often “what exactly are we buying?” Revenue, growth rate, customer count and market share are all important inputs in deal evaluation. Yet if the buyer does not understand the context behind those numbers, it can easily misread the true nature of the business.
Information gaps are especially large in the early stages of M&A. The seller understands the company’s strengths, operating model, customer relationships and growth story in detail. The buyer, on the other hand, has to assess the business within a limited timeframe and based on a limited set of materials. The wider this information gap becomes, the slower the decision-making process becomes and the weaker the buyer’s position may become during negotiation.
The M&A market in 2026 is showing signs of renewed activity, though not all transactions are recovering in the same way. PwC describes the current market as one increasingly shaped by larger transactions and strategic deals. Deal value has increased, while deal count has declined in some areas. This suggests that the market is not simply improving across the board. Rather, opportunities are becoming more concentrated among buyers with capital, execution capabilities and a clear strategic rationale. KPMG also describes the 2026 M&A environment as a complex decision-making landscape shaped by geopolitics, regulation, tax policy and technology change. In this environment, M&A outcomes depend not only on strategic intent but also on the ability to execute.
This is why early-stage M&A requires more than more documents. It requires sharper validation of the core assumptions behind the deal. Financial statements and legal documents alone do not fully explain the quality of growth, the stability of the customer base, the sustainability of competitive advantage or the true level of pricing power. Reducing information gaps early is not a supporting research task. It is a core process that affects the Go / No-Go decision, valuation adjustment, negotiation strategy and post-merger integration priorities.
Why information gaps matter in the early stages of M&A
The biggest reason information gaps matter in early-stage M&A is that there is often a gap between how the buyer sees the company and how the target company actually operates. The materials provided by the target are usually built around the company’s strengths and growth potential. This does not mean the information is wrong. The issue is that even when the numbers are accurate, the buyer may still misinterpret what those numbers actually mean.
For example, if a target company has grown revenue over the past few years, that growth can have very different underlying drivers. It may come from structural market expansion. It may come from a one-off order from a major customer. It may reflect price increases. It may also be the temporary benefit of a competitor losing ground. The same revenue growth can lead to very different conclusions about the company’s real competitiveness and future enterprise value depending on what is driving it.
In the early review stage, buyers should pay close attention to three types of information gaps.
- Quality of growth: Buyers need to understand whether revenue growth is repeatable or driven by one-off factors. The value of the company changes depending on whether growth comes from new customer acquisition, expansion of existing accounts, price increases or one-time large contracts.
- Stability of customers and operations: Buyers need to understand whether customers are truly loyal or simply staying because there are few alternatives. They also need to assess whether the business depends too heavily on specific people, suppliers, partners or systems.
- Pricing power and competitive pressure: Buyers need to test whether the company has room to raise prices, whether customers may leave after a price increase, whether the current competitive environment is unusually weak or whether competitors may enter more aggressively.
Information gaps also leave risks that are difficult to identify through public materials alone. Legal issues or contractual problems may be identified through document review. However, operational bottlenecks, weak organizational capabilities, customer dissatisfaction and competitive pressure often require a more practical understanding of the market. BRG’s M&A disputes research also points to due diligence gaps as one of the key sources of post-transaction disputes. In other words, risks that are not identified early can later appear as price adjustment disputes, warranty claims, earn-out disputes or operating performance issues.
The key in the early stage is not simply to verify the numbers. It is to interpret the quality of those numbers. If the deal moves forward without reducing information gaps, the buyer may accept the target company’s growth story at face value. But if that growth story is not sustainable from the market and customer perspective, the transaction may lead to value erosion after closing. The clearer the information becomes at the beginning of the M&A process, the fewer unnecessary revisions, delays and integration conflicts are likely to occur later.
Market validation before financial and legal due diligence
Financial due diligence and legal due diligence are essential in M&A. Before those steps, however, buyers need to understand the market and business reality surrounding the target company. In Korean M&A practice, this is often discussed under business due diligence or commercial due diligence. In this article, we will refer to it more directly as preliminary market validation. At this stage, buyers should not only look at “the growth the company claims” but also “the growth the market can realistically support.” Business plans may include ambitious growth rates and expansion strategies. In the actual market, however, customer budgets, buying cycles, distribution structures, regulatory conditions and competitor responses define the upper limit of growth. For that reason, revenue growth and margin improvement assumptions in the financial model need to be tested against market reality. This is aligned with KPMG’s view of the 2026 M&A market as a more complex decision-making environment rather than a simple recovery cycle. Even if M&A activity is picking up again, not every sector and not every company will grow at the same pace. Buyers need to examine the sector-specific growth story and the target company’s actual competitiveness in greater detail.
The purpose of preliminary market validation is to identify potential deal breakers before full-scale due diligence. If the target has excessive customer concentration, if revenue depends heavily on one-off projects, if the company has a weak reputation in the market or if competitors are already applying pricing pressure, these factors should directly influence deal terms and valuation. If these issues are discovered late in financial due diligence or near the end of negotiations, the buyer has already spent significant time and cost. That can weaken its negotiating position. Preliminary market validation is therefore not an added cost. It is a way to reduce deal risk and protect negotiation leverage. This is especially important in competitive auction processes where decisions need to be made quickly. Rather than relying only on public information, buyers need a structure that allows them to gather field-based insights from industry specialists, customer-side contacts and supplier-side contacts to validate growth potential, revenue quality, pricing power, customer retention and regulatory risk early.
How to use external expertise across each stage of M&A
M&A is not completed through a single due diligence exercise. Each stage of the transaction requires a different type of information. In the target sourcing stage, the key question is which companies are worth reviewing. In the preliminary review stage, the question becomes what is actually true behind the target’s growth story. In the full due diligence stage, the focus shifts to which risks are financially material. In the PMI preparation stage, the buyer needs to understand what may prevent successful integration after closing.
As PwC notes, larger and more strategic transactions are becoming more visible in the 2026 M&A market. This means buyers need to move faster, but they also need to validate their assumptions more precisely. External expertise can help buyers reduce uncertainty at each stage by bringing in market, customer, competitor and operating perspectives that are not always visible in the materials provided by the target company.
1. Target sourcing stage: narrowing down companies worth reviewing
At the target sourcing stage, buyers need people who understand the structure of the industry. The key is not to look at as many companies as possible. It is to narrow down the companies that are actually worth reviewing. Industry specialists can explain which segments are growing structurally, which companies may be less visible externally but well regarded inside the industry and where future M&A opportunities may emerge.
This stage is not simply about building a longlist. It is about improving the quality of the initial screening process so that the buyer does not spend time on companies that look attractive on the surface but are unlikely to meet the investment thesis.
2. Preliminary review stage: checking what is real behind the numbers
In the preliminary review stage, it becomes important to speak with people who understand the market from the inside, such as former competitors, former executives, customer-side contacts or supplier-side contacts. These people can help interpret the real competitiveness and execution capability behind the financial numbers.
To answer the question “why this company?” buyers need to look beyond revenue size and market share. They need to understand how customers evaluate the company, how competitors view it and whether the internal organization can support future growth. This is the stage where external perspectives can help separate a strong investment story from a story that only looks strong in a presentation.
3. Business due diligence stage: validating market demand and revenue quality
In business due diligence, also known as commercial due diligence, buyers need a more detailed understanding of customer demand, pricing structure, distribution channels and competitive pressure. A company presentation alone is rarely enough to capture these market signals. External expert interviews become especially important at this stage because they can reveal how the company is actually viewed in the market.
The buyer should test whether customers choose the company because of clear differentiation or simply because there are limited alternatives. It should also confirm whether the company has room to raise prices, whether competitors can easily replicate its offering and whether the main revenue streams are repeatable. This stage helps determine whether the assumptions used in the valuation model are realistic.
4. Full due diligence stage: connecting business risks to deal structure
In full due diligence, market and business risks need to be connected to the financial and legal structure of the deal. For example, if customer concentration is high, the buyer may need to revisit contract terms, price adjustment mechanisms or earn-out structures. If regulatory changes are likely, they should be reflected in valuation, warranties and closing conditions.
At this stage, external expertise is useful because it helps translate market-level risks into practical deal implications. The question is no longer simply whether a risk exists. The question is whether that risk should affect price, timing, deal terms or post-closing obligations.
5. PMI preparation stage: identifying what may block value creation after closing
PMI preparation should begin before the deal closes. Key talent retention, cultural differences, system compatibility and customer communication can create significant risks if they are only discovered after closing. External perspectives can help buyers understand which parts of the target’s operating model are fragile and which capabilities need to be protected after acquisition.
Stage-by-stage use of external expertise should therefore focus not only on closing the transaction but also on realizing value after the deal is completed. A good M&A process does not stop at validating whether the target is attractive. It also tests whether the value identified before signing can actually be preserved and expanded after closing.
Types of external experts to engage and their roles
In early M&A review, the priority is not to gather opinions from as many people as possible. It is to speak with the right people who can test the assumptions behind the deal. Even within the same industry, different people see different parts of the market. Some understand the overall market structure. Some know how customers make purchasing decisions. Some have seen the internal operating model. Others understand regulatory constraints. Buyers should therefore design the interview pool around the specific questions they need to answer.
| Type of external expert | What they can help verify | How they can support the deal review |
|---|---|---|
| Industry specialist | Market growth, industry structure, competitive landscape | Assess whether the target’s market is attractive and sustainable |
| Former executive | Strategy execution, organizational capability, decision-making structure | Test whether the business plan is realistic |
| Former employee | Operating model, internal process, organizational bottlenecks | Identify operating risks that are not visible in external materials |
| Customer-side or supplier-side contact | Buying criteria, satisfaction, switching risk, repeat purchase potential | Validate revenue quality and customer loyalty |
| Distribution or channel specialist | Channel structure, partner dependency, go-to-market constraints | Assess market access and scalability |
| Regulatory specialist | Licensing, policy change, compliance burden | Check regulatory risks that may affect the transaction after closing |
Industry specialists are useful for understanding the broad direction of the market. They can explain why an industry is growing, whether that growth is likely to continue, how the competitive landscape is changing and whether new entrants may create pressure. Former executives are valuable for understanding the gap between strategy and execution. A business plan may look logical, but execution can break down through sales organization issues, supply chain constraints, licensing hurdles or talent gaps. This is where the perspective of someone who has made real decisions in the industry becomes especially useful.
Former employees can provide insight into the details of internal operations. However, these interviews should not be designed to obtain confidential information. The right approach is to ask about general operating models, common industry practices, workflow patterns and risks that can be discussed based on experience. Customer-side and supplier-side contacts are particularly important when assessing revenue quality. A company may describe its customer retention as strong, while customers may feel they would switch providers if prices changed even slightly. This type of information is difficult to identify through public financial materials alone. Regulatory specialists can also surface risks that may not be visible at first glance. In regulated industries, a business model may be legally possible but costly or difficult to operate in practice. Identifying such issues early can materially affect the transaction decision.
Key questions to ask in external expert interviews
External expert interviews should not be treated as a general opinion-gathering exercise. They should be designed as a structured process for testing deal assumptions. A good interview does not simply ask “is this a good company?” It asks “what conditions must be true for the investment thesis to hold?” The questions should therefore focus on specific decision criteria rather than broad impressions.
Expert interview questions can be structured around four themes.
- Market attractiveness Why is this industry growing now? Is the growth structural or closer to temporary demand? Which factor is driving the market: regulation, technology change, customer budget shifts or another driver?
- Competitiveness and pricing power Why do customers choose this company? Would customers stay if prices increased? Does the company have a differentiating factor that competitors cannot easily copy? Are current margins supported by structural competitiveness or by temporary market conditions?
- Revenue quality and customer base Is revenue overly dependent on a specific customer or channel? Is repeat purchase likely or is revenue more project-based? If customers leave, what is usually the main reason?
- Operating risk and PMI feasibility Does performance depend heavily on specific people, suppliers, partners or systems? What is likely to become the first issue after acquisition? Could integration risks emerge from culture, reporting lines, IT systems or customer communication?
Questions should be as specific as possible. Instead of asking “is this company competitive?” it is more useful to ask “why do customers avoid switching away from this company?” Instead of asking “will growth continue?” it is better to ask “is growth being driven by price, volume, new customers or channel expansion?” The more specific the question, the more likely the interview will generate insights that can support deal decisions rather than general commentary.
Interview findings should also be interpreted through cross-checking. A single expert’s view can be shaped by that person’s role, timing and experience. When the same question is tested with an industry specialist, customer-side contact and former employee, the buyer can better distinguish between an individual opinion and a repeated market signal. Expert interviews are most valuable when they help the deal team validate whether the target’s market position, customer base, operations and competitive environment support the investment thesis.
How to combine traditional advisors with external expert validation
Traditional advisors and external expert validation are not substitutes for each other. They fill different gaps in the M&A process. Investment banks, accounting firms and law firms bring strengths in deal structure, financial review and legal analysis. External expert interviews are stronger at quickly capturing market reality and field-level reactions. If traditional advisors test the accuracy of documents and numbers, external experts help interpret what those numbers mean in the market.
In practice, the most effective approach is to run document-based review and field-based validation in parallel. For example, an accounting firm can review the accuracy of revenue and profitability. A law firm can examine legal risk and contract structure. At the same time, industry specialists or customer-side contacts can help assess whether that revenue is repeatable, whether customers are likely to stay and whether the pricing level is accepted in the market. This combination allows the same facts to be tested from different angles and improves the reliability of the buyer’s judgment.
The value of this parallel approach is speed and negotiation leverage. As PwC notes, the M&A market is moving faster around large transactions and well-capitalized strategic buyers. In this environment, waiting for every document to be complete may cause buyers to miss opportunities. Moving quickly without proper validation, however, can create larger post-deal risks. Risks identified through external expert interviews can be reflected in valuation adjustments, earn-out structures, warranty scope and other deal terms. In that sense, expert validation is not just a way to supplement information. It can help make the deal structure more precise.
Conclusion: reducing information gaps improves both speed and accuracy in M&A decisions
The early stage of M&A is often where the direction of the transaction is effectively decided. The extent to which the buyer reduces information gaps can determine whether it moves forward, adjusts price, changes negotiation terms or stops the deal early. Good M&A decision-making does not come from receiving more materials. It comes from validating the most important assumptions quickly and accurately.
The most practical way to reduce information gaps is to understand the market first, test the target through field-based insights and combine those findings with the financial and legal analysis provided by traditional advisors. When these three elements work together, Go / No-Go decisions become faster, valuation becomes more realistic and negotiation becomes more precise. Buyers can also identify potential post-merger integration risks early enough to set clearer PMI priorities.
Ultimately, the most expensive mistake in M&A is not simply “not knowing.” It is failing to check something that could have been checked. Using external experts and field-based insights in the early stage is not just research. It is a practical strategy for improving the probability of M&A success.
If you want to better understand the market potential and risks of a company you are considering for acquisition, Liahnson & Company can help. With a global network of more than 6M+ experts, including over 5M+ in Korea, we help you assess the growth potential, competitiveness and operational risks of target companies with greater clarity.
Source
https://www.pwc.com/ua/en/survey/2026/global-ma-outlook-2026.html