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What Role Do Backgrounds Play in Private Equity Transactions?

A Guide to Gaining Improved Transparency and Validation During Due Diligence

When your private equity (PE) firm is looking to acquire or take a majority stake in a target company, the due diligence process is critical to reducing risk and ensuring you only move forward with the most viable investments. But sometimes, the due diligence process focuses primarily on the company and fails to sufficiently vet the executives who own and run the business. Even when the executive team is investigated, some firms rely on simple automated background checks and forego a more detailed, nuanced human analysis. Yet, as recent high-profile cases have underscored, such an oversight can prove costly and damaging.

This guide reviews the importance of properly investigating executives and what can go wrong if you don’t, explains why artificial intelligence (AI) and other technology tools only skim the surface and don’t provide a full and accurate picture of key executives, and details the most common red flags that only come to light through the skilled analysis of a human investigator.

This guide also reviews why the combination of technology tools and human insight yields better transparency and validation on background investigations and why a third-party investigative firm is the right choice to help your PE firm move forward on deals with greater confidence.

This guide is designed to help you avoid the risks of not sufficiently vetting the founders, CEOs, and other executives of your target companies before adding these businesses to your portfolio.