Three Decisions Before You Sign: A Dry Run for Acquisition Diligence

The diligence pack arrives in numbered tabs. Historic accounts, management accounts, contracts, litigation schedules, pension obligations, an analysis of customer concentration. It is thorough, and it is almost entirely retrospective. It describes what the business has recorded, not how the people running it behave when the information is incomplete and the outcome is contested.

That gap is where most post-completion disappointment lives. Synergy assumptions fail less often because the numbers were wrong than because the two organisations make decisions at different speeds, with different evidence standards, and with different ideas about who is entitled to overrule whom.

What a dry run is, and what it is not

A decision dry run is a structured conversation with target management about decisions they have actually taken. It is not an assessment centre, not a psychometric exercise and not an interrogation about past failures. It tests process rather than outcome, and it works best when framed that way from the outset.

The method is simple. Select three decisions from the last eighteen months that were material, genuinely uncertain at the time, and cross-functional. Then reconstruct each one in the room, in sequence, against a fixed set of questions.

Good candidates tend to be: a significant capital commitment, the entry or exit of a product line or geography, a senior appointment or departure, a pricing reset, a major customer concession, or a system replacement. Avoid the obvious set pieces — the acquisition they are proud of, the crisis that became a case study. You want ordinary pressure, not narrative.

Running the session

Ninety minutes is usually enough for three decisions if the discipline holds. The format that works is unglamorous.

Before the session. Ask for a one-page summary of each decision: what was decided, when, by whom, on what basis. No pack, no slides. The summary is itself a data point — a target that cannot produce one in a week is telling you something about its record-keeping.

Who attends. The chief executive, the finance lead and the functional lead closest to each decision. Ideally the seller stays out of the first hour; a founder in the room changes what employees are willing to say. If the seller insists on attending, run the session with management alone and treat the seller's presence as a constraint to be noted.

Who asks. Two or three people from your side at most. A crowded room produces performance; a small one produces recollection.

The sequence. For each decision, walk through four stages: what was known, how it was tested, who was involved in the call, and what happened afterwards. Keep to thirty minutes and resist the temptation to relitigate the commercial merits.

The four tests

Evidence quality

Ask what the decision rested on. Was there a written case? Who challenged the assumptions? What would have had to be true for the opposite conclusion to hold? Targets that describe their evidence as "the numbers" or "the model" are describing a single source. Look for whether anyone was tasked with finding the counter-case, and whether the counter-case survived into the paper.

Escalation

Establish the path. At what point would this have gone to the board, and did it? What was the threshold — value, risk, reputational? Who could stop it, and did anyone try? Fragility shows up here: if every significant decision routes to one person, the business is a key-person risk wearing a governance structure.

Dissent

Ask directly who disagreed with the decision. Then ask what happened to that disagreement. A management team that can name the dissenters, describe their argument fairly and explain why it was outweighed is showing you something valuable. A team that reports unanimity on a genuinely uncertain call is either fortunate or inattentive. Two of the three, unanimity is the less reassuring answer.

Follow-through

Finally, ask what was expected to happen, what actually happened, and when the team knew the difference. Decision quality and decision outcomes are different things; you are testing whether there is a review loop at all. Businesses that cannot say what they expected six months on are unlikely to learn quickly inside your group.

Red flags worth naming

A few patterns recur and deserve weight in the investment committee paper.

• Consistent retrospective success. Every decision is described as having worked. Either the sample is curated or the review loop is absent.
• Disagreement attributed to personalities. Dissent remembered as a difficult individual rather than a position.
• No written cases. Decisions taken verbally and reconstructed afterwards.
• Escalation by instinct. Thresholds undefined; everyone simply knows when to ask.
• Divergent account of the same decision from two attendees — not fatal, but a reliable indicator of how the integration will feel.

Keeping the deal stable

Enquiries about how decisions are made can read as an implicit criticism of the people making them. Three precautions help. First, agree the framing with the seller in advance: this is integration planning, not a second-guessing exercise. Second, keep the session under the same confidentiality arrangements as the rest of diligence and use a clean team where the target's commercial sensitivities require it. Third, sequence it after the financial work has narrowed the field, so that management is not asked to open up on a transaction that may not proceed.

It is also worth remembering that the dry run produces value in both directions. Targets respond well to being asked about judgement rather than about compliance, and the answers give you the raw material for a hundred-day plan that reflects how the business actually runs.

What you do with the findings

The output is not a score. It is a short note — two pages at most — recording each decision, the evidence standard applied, the escalation path, the treatment of dissent and the review discipline. Some of it will reassure. Some of it will suggest a price adjustment, a retention arrangement or an integration sequence that keeps a decision-making structure intact for longer than the standard playbook allows.

Occasionally it will suggest that the team in the data room is not the team that will run the business afterwards, which is better learned before completion than after. Numbers describe what a company has done. Three decisions, properly reconstructed, tell you how it will behave when the next uncertain call arrives — and that is the thing you are actually buying.