Key Takeaways
Healthcare M&A due diligence is two-way because both buyer and seller must evaluate risk, strategic alignment, cultural fit, and long-term partnership potential before closing. Buyers examine financial performance, compliance, and operational exposure. Sellers should scrutinize the buyer's track record, integration approach, leadership style, and deal structure with equal discipline. When due diligence is mutual and supported by experienced M&A advisors and legal counsel, it reduces surprises and lays the groundwork for a stronger, more sustainable transaction.
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In a VERTESS column by my colleague Connor Cruse, he outlined how sellers can prepare for due diligence in a behavioral health transaction and what buyers typically evaluate once the process begins. I want to continue that conversation from another angle. After decades of advising owners across healthcare verticals, I've seen a recurring issue: Due diligence in healthcare M&A (mergers and acquisitions) is often treated as a one-directional review, when it should, in fact, function as an evaluation that's carefully executed by both parties.
With healthcare transactions, we are dealing with regulated environments, patient care, clinical teams, and reputations that may have taken 20-plus years to establish. The diligence process sets the tone for everything that follows. When handled properly, it reduces uncertainty and builds confidence on both sides of the table.
What Is Healthcare M&A Due Diligence Designed to Do?
At its core, due diligence in a healthcare transaction serves to mitigate risk and validate assumptions. Buyers need to confirm that financial performance is accurate and sustainable. They examine the likes of reimbursement patterns, payer mix, revenue cycle integrity, compliance programs, and documentation standards. They assess employment agreements, contractor classifications, tax filings, and any pending or threatened claims.
The goal is straightforward: uncover material issues prior to close. Buyers want to ensure there are no hidden liabilities, no undisclosed regulatory concerns, and no surprises that compromise value after the transaction is complete.
In healthcare, that scrutiny is intensified by the regulatory landscape. A billing inconsistency or compliance lapse can have consequences well beyond a balance sheet adjustment. Buyers are right to take a comprehensive approach.
What I emphasize to sellers, however, is that the process should not stop there.
Sellers Must Conduct Due Diligence Too
An important question healthcare founders should ask before moving forward with a transaction is: "What do you know about the group interested in acquiring your business beyond their capital?"
Sellers generally spend months preparing data rooms and responding to detailed requests. Meanwhile, they may not be asking the same level of questions about the buyer's infrastructure, operating philosophy, or track record in healthcare M&A. In my view, that imbalance creates unnecessary — and potentially significant — risk.
How have prior acquisitions performed under this buyer's ownership? What investments were made post-close in compliance, technology, recruiting, and leadership support? How does the buyer approach integration during the first year? What happens when performance dips or regulatory pressure increases?
If you are rolling equity or tying a portion of your proceeds to future performance, those answers directly affect your financial outcome and your day-to-day reality.
Culture and Leadership Are Part of Diligence
I have watched more than one strong transaction struggle after closing for reasons that never appeared in the financial model. On paper, the numbers worked. The compliance review was clean. The valuation made sense. Yet friction surfaced almost immediately because expectations around areas like leadership, reporting, and autonomy were never fully explored during diligence.
Healthcare businesses are built around people like clinicians, administrators, referral partners, and executive teams. If leadership styles clash or decision-making authority shifts unexpectedly, the impact shows up quickly in morale and performance. That's why I encourage real interaction during diligence that goes beyond formal management presentations. Founders should meet the operating partners who will actually be involved post-close. Clinical leadership should spend time with those overseeing quality and compliance. Those conversations reveal far more than a slide deck ever could or will.
Strategic Alignment and Deal Structure
Alignment becomes very real once you move from conversation to deal structure. It's easy for both sides to express enthusiasm about growth. It's harder to define exactly how that growth will be funded, managed, and measured. If a buyer intends to expand geographically, what infrastructure is already in place? If the seller is expected to remain involved, what authority will they retain? How will success be defined a year from closing?
This is where deal structure matters. Earnouts, rollover equity, governance rights, employment agreements — each provision shapes incentives and defines risk. I spend significant time with clients walking through these elements because structure forces clarity. When incentives are aligned, the partnership has a solid foundation, but when they are not, tension often follows.
Why Does Two-Way Diligence Build Trust?
Trust develops gradually during the diligence process, often in moments that can feel routine. When buyers are transparent about their expectations and sellers respond candidly about operational realities, we see the tone become much more collaborative. Issues are addressed directly, assumptions are tested, and adjustments are made with full visibility.
In healthcare M&A, where regulatory compliance and patient care standards are constant priorities, that transparency is absolutely essential. Both sides need confidence that the partnership can withstand scrutiny and inevitable change.
I view due diligence as an opportunity to confirm compatibility between buyer and seller. It allows both parties — not just one — to evaluate financial performance as well as decision-making processes, communication style, and long-term objectives.
Healthcare founders rarely sell more than one company. On the other hand, many buyers complete transactions regularly. That experience gap makes it even more important for sellers to engage actively in diligence rather than simply respond to it.
How to Approach Healthcare M&A Due Diligence
When it's your time to sell your healthcare company, approach the diligence process with preparation and curiosity. That means asking direct questions, reviewing the buyer's history in healthcare transactions, and understanding how integration will unfold in the first year. Examine how incentives are structured and how risk is allocated. Make sure the transaction aligns with your goals and the future you envision for yourself, your organization, your leadership team and staff, and the individuals you serve.
Over the years, I have seen how much difference the right guidance makes during this stage. A healthcare M&A advisor — or team of advisors, like we have here at VERTESS — should do more than manage a data room. They should help you evaluate the buyer's operating capabilities, strategic intent, and track record with prior acquisitions. An experienced healthcare attorney plays an equally important role, translating diligence findings into precise contractual protections and ensuring that representations, warranties, indemnification terms, and post-closing obligations accurately reflect what has been uncovered. Together, they help surface issues early, clarify structure, and protect your position before documents are signed.
Healthcare M&A due diligence, when treated as a two-way street and supported by the right advisory team, reduces surprises and strengthens partnerships. In my experience, that foundation is what distinguishes transactions that simply close from those that perform well long after the closing dinner.
If you're considering a healthcare transaction and want to think through how to approach diligence from both sides of the table, I'm always available for that conversation. And if you're still evaluating whether now is the right time to sell, the VERTESS Healthcare M&A Readiness Self-Assessment can help you determine where you stand and what steps may come next.