BUY-SIDE ADVISORY | PRIVATE AND PUBLIC MARKETS
Buy-side M&A
Operator-Led Buy-Side M&A Advisory
Diligence from people who have run the kind of company you are about to buy, and sold one at a premium.
On every transaction, Arete Ventures acts for one side only and never for both. Our buy-side clients are US private equity and venture capital firms first, then the LPs, family offices and boards who invest alongside them. We work on deals in technology and deep tech, manufacturing, industrials and energy, mostly in the US, with some in the UK.
Our managing partner, Gaurav Shah, spent sixteen years as an operating partner at a San Francisco private equity firm. He is a chemical engineer with six US patents who has built and run industrial plants, and he advises long-only public market managers. On your deal, that means one senior person can tell you whether the asset and the team can deliver the plan, and what the public market will pay for the company at exit.
13x
EV/EBITDA exit on a manufacturing company we owned, in a sector that traded at 8 to 9x
3.25x
MOIC on that investment over a six-year hold
3 of 5
Portfolio companies that exited above plan while we were operating partner
4 of 6
Distressed acquisitions that exited at a significant profit with positive free cash flow
3 of 9
Diligence engagements where we advised against proceeding. Two of those companies later sold at a loss
Nine buy-side diligence engagements from $60M to $575M in enterprise value, seven of them in the US.
What diligence misses
Why Buy-Side Diligence Misses the Same Things
Most diligence is written by teams who leave at signing. We have been the people who inherited the plan afterward, and the same three gaps kept showing up in what we inherited.
01
The plan assumes capacity the business has never shown.
Models get built on nameplate capacity, a booked pipeline or the uptime from a demo. We look at what the plant, the product and the sales team have actually delivered in recent quarters. One plant we acquired on the US East Coast was running 40% below nameplate, and nothing in the seller's numbers explained why. Case 01 below shows what we found.
02
The plan assumes a management team that does not exist yet.
Diligence checks whether the plan is achievable. It rarely checks whether the people now in the building can deliver it, or how long it takes to replace the ones who cannot. In our experience that answer decides the first year of the hold.
03
The downside case is a haircut on the base case.
Trimming the base case by a fixed percentage is arithmetic. Underwriting what the business looks like when its top three customers renegotiate in the same quarter is a different exercise. It is the one that decides whether the capital structure survives.
The mandate
What We Do on a Buy-Side Mandate
Five workstreams, ordered by where deals actually lose money.
01
Diligence Written From the Owner's Side
We test what would have to be true for the plan to work, and who inside the business will make it true. The questions depend on the sector.
Manufacturing and industrials
In manufacturing and industrials, we compare demonstrated output with nameplate, check the maintenance record against the schedule, and trace how raw material actually reaches the plant and at what landed cost.
Technology, deep tech and automation
In technology, deep tech and automation, we compare how deployed systems perform at customer sites with how they performed in the demo. We also check what it costs to keep each unit running, and whether the product roadmap in the model has engineers assigned to it.
Energy
In energy, part of EBITDA often comes from policy credits such as RINs, LCFS credits and the 45Z clean fuel production credit. We have priced that dependency on several deals, and we show you what the business earns when those credits are worth less.
02
Public-Market Pricing on a Private Target
A private target is eventually sold into a market that prices on public comparables, trading multiples and sector sentiment. We sold a manufacturing company at 13x EV/EBITDA when its sector traded at 8 to 9x. A premium like that is earned through specific characteristics, and we know which ones buyers pay for.
We also advise long-only public market managers in the US, mostly on specific operating questions about companies they hold or are weighing. That keeps us close to what the public comp set actually pays. In diligence, we test whether the multiple you are underwriting has ever been paid for a business like this one, and what the company would need to look like at exit to earn it. Our note on exit multiple diligence shows how we work out what the next buyer can pay.
03
Distressed and Underperforming Targets
Distressed diligence asks different questions: whether losses come from the structure of the business or from decisions, how much liquidity the first ninety days consume, which liabilities travel with the asset, and whether a viable business exists at much lower revenue.
We have answered them as principals. We acquired six distressed assets across technology, manufacturing and energy. Four exited at a significant profit, with positive free cash flow.
04
Cross-Border Execution
Cross-border deals usually reach us as a US buyer acquiring a company with operations or supply chains abroad. Regulatory, tax and structuring terms vary by jurisdiction and change without notice, so we treat them as inputs to deal structure from the first week. Supply chains matter as much as tax: part of the fix at the East Coast plant was contracting raw material from outside the US. We bring in specialist counsel where the deal needs it.
05
The First Hundred Days
Deals lose value in the two quarters after close more often than in the diligence before them. We build the 100-day plan during diligence and price it into the offer, so the first capital decisions are made before you own the problem.
Where the work continues into sustained operating change, it sits with our Performance Improvement Advisory. Integration and value capture during the hold sit with Private Equity & Venture Capital Advisory.
Proof
Selected Engagements
Three engagements, with the numbers and how we measured them. Client and company names are withheld.
01 · Principal investment
The plant ran 40% below nameplate. Nothing in the seller's numbers explained why.
Manufacturing facility · US East Coast · acquired and operated by our PE firm
What we found. Three problems sat underneath the shortfall. Inbound deliveries ran late and on no predictable schedule. Maintenance cycles existed on paper and were never carried out. Raw material was bought only from domestic suppliers at a high landed cost: it moved by rail to a freight forwarder's terminal, then by truck to the plant.
What we did. We put the maintenance program in place and upgraded the plant. We built a rail spur on site, so raw material arrived at the plant directly. We set up international supply contracts to import raw material into the US.
What it meant for the investment. The plant broke even in its eighth month and turned free cash flow positive in its tenth. From then on it ran at 97.5% of capacity, with EBITDA margins above 43%.
Capacity utilization against nameplate
At acquisition: 60%
After the fixes: 97.5%
97.5%
Capacity utilization, up from 60%
Month 10
Free cash flow positive
43%+
EBITDA margin
02 · Buy-side diligence
The valuation worked in the model. The exit multiple did not exist in the market.
$270M transaction · industrial technology · US and cross-border · PE buyer · 4.5-month deal timeline
"Are we paying a defensible price for this business, or relying on the exit market to validate the entry?"
What we found. The operating plan could support the forecast EBITDA. The investment case, though, needed the business to exit at a multiple the relevant public market had rarely paid for companies with its growth rate, margin profile and customer concentration. The risk sat less in the DCF than in the assumption that operating improvement would turn into multiple support on its own.
What we did. We rebuilt the comparable-company set around the characteristics public-market investors actually priced, beyond sector labels. We separated EBITDA creation from multiple expansion and tested the deal under lower public-market valuations. Then we set out the operating milestones the company would need to reach before a premium exit multiple became defensible.
0.3x
Reduction in defensible exit multiple versus original underwriting
$16M
Lower implied exit value under the revised market-based case
50 bps
Reduction in underwritten IRR
03 · Technical diligence for a public-market investor
The market was pricing the core business. We found an emerging platform it was barely pricing at all.
US-listed energy infrastructure company · global operations · long-only asset manager
What we found. The investor asked whether a new business inside an established company was an investable technology platform or a science project. The technology did not depend on an unproven breakthrough. We traced the process design, equipment partners and field-deployment path, then tested the economics against the physical realities of gas treatment, liquefaction and modular construction. The market was pricing the company mostly on its established LNG assets and giving little credit to the new distributed-energy platform.
What we did. We separated technical feasibility from management's commercial assumptions, and found where the technology could still fail: gas composition, utilization, logistics, offtake, and the step from a successful demonstration to repeatable commercial deployment. As the share price rose, we reassessed the valuation and advised the investor to stay invested.
+90%
Subsequent share-price appreciation
HOLD
Recommendation after valuation assessment
Share-price appreciation is measured from the approximate date of our recommendation to a later market reference point. Client, issuer, position size, entry price and valuation at the recommendation date are withheld. Past results do not predict future returns.
Engagement
How a Mandate Works
Every mandate is fixed-fee, with no success fee. We are paid the same whether the deal closes or not, which is why we can advise you to walk away. Senior people do the work.
What You Receive
The work is built around the decision in front of you.
At the center
At its center is an investment committee memo you can table as written: our recommendation to proceed or walk away, the price range we would underwrite, and the risks that move that price. Around it, we deliver what the deal needs.
Red-flag report.
Early in a process, when you need to know within weeks whether anything should stop the deal.
Full diligence report.
When your committee, co-investors or lenders want the complete operational, technical and commercial record.
Deal-term inputs for your counsel.
Closing conditions, escrow, holdbacks and price adjustments, each tied to a risk we found.
100-day plan.
Written before you sign, with an owner and a date for each early decision.
Committee presentation.
We present the findings to your investment committee or board and take the questions.
About 4 weeks
Pre-IC Read
A red-flag report or IC memo on a short clock, focused on the assumptions the price depends on most, including the exit multiple.
8 to 24 weeks
Buy-Side Mandate
Full diligence on one target, from the indicative offer to signing, with whichever of the deliverables above the deal requires.
Questions
Frequently Asked Questions (FAQs)
How is a buy-side advisor different from an investment bank or sell-side advisor?
A sell-side advisor works for the seller, and an investment bank is usually paid a success fee when the deal closes. A buy-side advisor on a fixed fee works only for the buyer and is paid the same whether you close or walk away. That independence is the point, because the advice can include not doing the deal.
What is operational due diligence in a buy-side M&A deal?
Operational due diligence in a buy-side deal tests whether the business can produce the plan. The arithmetic is checked in financial diligence. It covers demonstrated capacity, customer concentration, cost-to-serve by account, management capacity and systems. It also covers how much cash and management attention integration will consume before any synergy arrives.
How does diligence change for a distressed or underperforming target?
The questions invert. Instead of testing the growth case, you test survivability: whether losses are structural or come from decisions, how much liquidity the first ninety days consume, which liabilities transfer with the asset, and whether a viable business exists at much lower revenue.
Should a PE firm use its existing Big Four team or an independent buy-side advisor?
Use both, for different questions. Big Four transaction services is built for quality of earnings, tax and regulatory validation at scale. An operator-led advisor is built for execution risk: whether the asset and the management team can carry the plan, and what the first hundred days actually cost.
Why do public market comparables matter when buying a private company?
Because the eventual exit is priced by the public market and its comparables, and your entry model does not set that price. Checking whether the multiple you are underwriting has ever been paid for a business with these characteristics turns a valuation into a defensible exit view.
When should a buy-side advisor be brought in?
Before the indicative offer. By exclusivity, and certainly by confirmatory diligence, the price is largely set and the advisor's role narrows to documenting risk. The work is worth most while it can still change the number.
Next step
Before You Appoint Anyone
Ask any buy-side advisor what they were accountable for after the deal closed.
We take a small number of mandates at a time, on the buy side only. If the price is already set and our work cannot change it, we will tell you on the first call.
Insights for buy-side decisions
Exit Multiple Diligence: Will the Next Buyer Pay Your Multiple?
How to work out what the next buyer can pay before you sign, and what to do when the model assumes more.
Deep Tech Due Diligence: Finding the Metric That Gates Revenue
The number that decides revenue in AI, quantum, tokenization, biomanufacturing and robotics, and the deal term that fits a gap.
DPI in Private Equity: Why EBITDA Growth Is Not Reaching LPs
Why cash release is set in the credit agreement at signing, and how the DPI Conversion Rate measures what reaches LPs.
Related advisory
Private Equity & Venture Capital Advisory · Performance Improvement Advisory