What is operational due diligence?

When entering a merger, acquisition or investment, one of the most critical aspects of the due diligence process for the buy-side acquirer is evaluating how a target company runs behind the scenes. This evaluation, known as operational due diligence (ODD), goes beyond financial statements and legal documents. It involves a thorough evaluation of the systems, people and processes that drive the business day-to-day.

At its core, ODD seeks to identify potential risks, inefficiencies or red flags that could impact the long-term success of a deal. Investors and buyers want confidence that a company not only looks good on paper but also operates effectively and sustainably in practice. Without a comprehensive understanding of the operational landscape, stakeholders risk of overestimating value or overlooking future challenges.

Why operational due diligence matters

ODD offers deep insights into key business functions such as IT infrastructure, supply-chain logistics, human resources (HR), compliance frameworks, internal controls and general business processes. Each of these areas plays a pivotal role in assessing a company's long-term viability, scalability and investment potential. For instance:

• IT systems: Is the company’s tech stack scalable, secure and compatible with the acquiring company's infrastructure?
• Supply chain: Are there vulnerabilities in vendor relationships, logistics or sourcing that could disrupt business?
• Human resources: Are there risks tied to key personnel or leadership attrition? Are compensation and benefits in line with industry standards?
• Regulatory compliance: Is the company adhering to all applicable laws, industry regulations and data privacy requirements?

By thoroughly evaluating these operational areas, investors and acquirers can uncover hidden liabilities and potential post-merger integration (PMI) challenges. At the same time, they can identify opportunities for optimization and synergies that can enhance the overall value of the transaction.

The challenges of ODD

While the importance of ODD is widely recognized, executing it effectively can be complex and resource-intensive. The process requires collaboration across multiple departments and stakeholders, secure sharing of sensitive information, and a structured system for managing documentation and communications.

Without the right tools, this phase of due diligence can quickly become disorganized and error-prone, potentially exposing confidential data to unnecessary risk. That’s where virtual data rooms (VDRs) prove essential, particularly Intralinks DealCentre AI, which is purpose-built to streamline and secure the ODD process.

How Intralinks simplifies ODD

Intralinks DealCentre AI is an advanced platform purpose-built to enhance workflows, automate processes and boost deal intelligence for smarter, faster and more secure transactions.  It provides a secure, centralized workspace where all parties involved in the transaction can access and review critical operational information, collaborate in real time, and monitor progress throughout the deal lifecycle.

1. Secure information sharing

Operational data, such as employee records or proprietary workflows, is highly sensitive. Intralinks ensures secure information sharing with bank-grade security features, including encryption, two-factor authentication, customizable user permissions and watermarking. These measures ensure only authorized users can access or interact with specific documents.

2. Centralized document management

Intralinks simplifies due diligence by storing all materials, such as HR policies, IT audits or compliance records, in a single, organized location. This approach eliminates version issues, reduces redundancy and ensures everyone works from the same source of truth.

3. Real-time activity tracking

Identifying who accessed specific materials and provides powerful insights into investor interest and concerns. Intralinks’ activity tracking features allow deal managers to monitor engagement, follow up effectively and make data-driven decisions.

4. Efficient collaboration

Intralinks enhances communication across teams with Q&A management tools, integrated notes and structured workflows. These features reduce email clutter and keep all discussions tied directly to the relevant documents, speeding up the decision-making process.

5. AI-powered insights

Managing large-scale transactions manually is both inefficient and impractical. Intralinks leverages artificial intelligence (AI) to streamline document categorization, automate redaction and identify risk, helping teams to focus on critical priorities.