Due Diligence as a Risk Mitigation Instrument in United States Mergers and Acquisitions: A Critical Review of Evidence and Practice
Eric Asamoah *
Department of Economics, St. Louis University, USA.
Dominic Acquah
Southern Illinois University, Carbondale, IL, USA.
*Author to whom correspondence should be addressed.
Abstract
Companies in the United States capital market continue to pursue mergers and acquisitions at remarkable scale, even as a substantial body of research documents that most acquiring firms fail to create value for their shareholders. Among the explanations offered for this persistent underperformance, deficiencies in pre-acquisition due diligence rank prominently. This paper presents a critical narrative review of how due diligence functions as a risk mitigation mechanism across the M&A process, drawing on peer-reviewed literature from finance, law, strategic management, and information systems.
The review traces due diligence across seven domains—financial, legal, regulatory, operational, cultural, technological, and environmental, social, and governance (ESG)—examining what each dimension investigates and what the evidence says about its consequences for deal outcomes. Several consistent findings emerge. Rigorous financial due diligence constrains the tendency to overpay. Legal and regulatory investigation reduces exposure to post-closing litigation and antitrust risk. Operational assessment disciplines synergy projections. Cultural and human capital due diligence, often underinvested, predicts integration success at least as reliably as strategic fit. Cybersecurity and ESG due diligence are no longer peripheral concerns but have become financially material in numerous US transactions.
The accumulated evidence from the US capital market indicates that acquirers with stronger due diligence capabilities—supported by dedicated M&A teams, high-quality advisers, and deliberate learning across successive deals—achieve meaningfully better outcomes. The paper also identifies persistent gaps: the causal effects of due diligence quality remain difficult to isolate empirically; ESG due diligence lacks a strong theoretical foundation; and the potential of artificial intelligence to transform investigative practice has received almost no academic attention. These are consequential omissions that define a productive agenda for future research.
Keywords: Mergers and acquisitions, due diligence, risk mitigation, United States capital market, M&A performance, post-merger integration, valuation, ESG