The Deal-Killing Data Mistake You’re Probably Making

Hey, it’s David!

During a recent conversation with a CFO, we hit on something that every investor, operator, and dealmaker needs to grasp… your data isn’t just numbers. It’s the narrative behind your performance, risk, and upside potential.

And here’s the kicker: the biggest M&A mistakes don’t come from bad strategy; they come from misreading the story the data is already telling you.

Whether you’re evaluating a portfolio company, optimizing a deal structure, or tracking post-merger performance, data is speaking. The question is, are you listening?

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Use the “Identify – Isolate – Refine” Approach to “Hear” the Story Your Data is Telling You

1. Identify: Find the Signals Before They Become Red Flags

In every deal, time is your enemy.

Waiting until something is "obviously broken" means you’re already behind. Top investors spot the subtle shifts before they turn into full-blown crises.

Consider the following:

• Portfolio performance slipping? Look at margin compression, customer retention, and CAC trends early… before they hit your valuation.

• Sellers’ numbers look too perfect? Identify anomalies that suggest revenue manipulation or unsustainable customer acquisition strategies.

• Competitors making moves? Spotting changes in sector multiples or deal pacing early could mean the difference between catching the wave or getting wiped out.

💡 Action Step: Define your “north star” metrics; things like revenue quality, cost efficiency, and risk indicators. Track them religiously.

2. Isolate: Cut Through the Noise and Find the Root Cause

Data isn’t useful unless it answers why.

• Why is a deal failing?

• Why is a company struggling?

• Why is your growth stalling?

 Let’s say you’re reviewing a target company’s revenue growth, but something feels off.

• Is their customer churn rising while revenue is climbing? That might mean they’re burning through new customers at an unsustainable rate.

• Is their EBITDA solid but gross margins slipping? That could mean hidden cost pressures that will hit hard post-acquisition.

• Did a sales pipeline slow down? Dig deeper. Are deals dropping at a specific stage, or is the entire funnel clogged?

💡 Pro-Tip: Use cohort analysis to see how customer behavior changes over time. This will tell you if you’re looking at temporary turbulence or a structural problem.

3. Refine: Don’t Just React, Use Data to Anticipate

Business winners don’t just react to problems; they refine their strategy before the market forces them to.

• If your data shows a weakening customer retention rate, don’t wait, fix the post-acquisition integration now.

• If marketing efficiency is declining, it’s not just a bad quarter, it could be a sign that demand is shifting, and you need to reposition.

• If an investment thesis is based on “optimizing operations,” make sure you actually understand what’s broken, otherwise, you just bought a problem disguised as an opportunity.

💡 Action Step: Build feedback loops so you’re adjusting in real time, not reacting when it’s too late.

Why This Matters

Private equity, M&A and business growth are all about making the right bets, at the right time, for the right price.

But the biggest risks in a deal? They don’t come from what you don’t know, they come from what you ignored.

Your data is telling a story. The only question is, are you reading it in time?

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Thank you!

David