Why Marketing is Becoming a Critical Due Diligence Focus for Investors
For years, marketing has been an afterthought in the private equity due diligence process. Investors have traditionally focused on financial, operational, and legal due diligence, assuming that marketing is either unlikely to impact top-line revenue projections or something that can be optimized post-acquisition. But as competition for high-value acquisitions intensifies and growth expectations rise, this outdated approach is becoming increasingly risky and can significantly impact profitability (CFO, 2023).
Firms that overlook marketing due diligence expose themselves to unnecessary financial and strategic risks. Many have acquired companies only to find that their marketing inefficiencies limit growth potential, customer acquisition costs are unsustainable, or revenue projections were based on flawed assumptions. Others have passed on investment opportunities without realizing that a stronger marketing strategy could have unlocked significant alpha.
With the current investment landscape encouraging an emphasis on sustainable, profitable growth, more investors are recognizing that marketing is a key driver of long-term revenue success. A thorough assessment of a company’s marketing function during the due diligence process can uncover hidden opportunities, mitigate risks, and provide critical insights that shape a stronger investment thesis.
In this article, we’ll break down:
What marketing due diligence is and what it should include
Why investors previously overlooked marketing due diligence
Why marketing due diligence is essential in today’s investment market
The risks of skipping marketing due diligence
What Is Marketing Due Diligence?
Marketing due diligence is the process of evaluating a company’s marketing strategy, efficiency and scalability to assess its impact on revenue growth and profitability. Just as financial due diligence verifies revenue and cost structures, marketing due diligence ensures that growth projections are grounded in data.
A thorough marketing due diligence process includes the following elements.
Review revenue model
How much revenue has the company generated each year, and from which sources?
Review product roadmap
Is the marketing team’s vision in line with the company’s vision for the product?
Conduct a TAM analysis
How much of the TAM is left to capture?
What’s the current market share relative to that of competitors?
Review funnel metrics
Has the company’s win rate increased or decreased over time?
Have their marketing activities become more or less effective over time?
Review deal metrics
How much can the company afford to spend to acquire a customer?
How long does it take to recoup customer acquisition costs?
Review marketing spend and activities
Which marketing channels is the company focusing on and how are their resources allocated?
Review marketing pipeline contribution
How much of the sales pipeline is influenced by or generated by marketing?
How many dollars of pipeline are generated per dollar of marketing spend?
Analyze channel and campaign performance
Which channels and campaigns drive conversions at the highest rate, and which ones aren’t worth spending additional time and budget on?
Assess potential paid media spend
How has budget historically been allocated to paid media?
Is there an opportunity to profitably scale paid media spend?
Assess potential to scale SEO
How is the company’s SEO performing relative to competitors, and is it worth allocating resources to improve this?
Assess opportunities to scale marketing
Can budget be reallocated away from campaigns that are underperforming and into ones that are underleveraged?
Assess strategic growth opportunities
Are there new high-level initiatives that could unlock growth, e.g. changing pricing or expanding into new markets?
Evaluate marketing team and org structure
Are the right team members in place to capture the highest-value opportunities? Or is the team over-resourced in areas that aren’t driving growth?
Evaluate technology stack
How much is being spent on marketing tech? Are there opportunities for efficiencies?
Are there platforms that can be used more effectively?
Build financial forecast
What is expected from marketing over the next year?
How does this compare with the forecast numbers provided by the team?
Why Investors Previously Overlooked Marketing Due Diligence
If marketing due diligence provides critical insights into the financial health and future potential of a target acquisition, why have investors traditionally deprioritized marketing? There are three key reasons.
Overreliance on sales performance
Some companies can grow to $10M or more in revenue with an immature marketing function, but eventually this growth will be capped by their reliance on sales. While sales performance is a major focus in due diligence, marketing plays a crucial role in filling the pipeline with high-quality leads. If marketing is underperforming, the cost of acquiring new customers may be unsustainable. Investors who fail to examine the marketing funnel in detail risk misjudging a company’s ability to maintain or accelerate its growth trajectory.
Assumption that marketing can be fixed post-acquisition
Many investors assume that if a company’s marketing isn’t performing well, it can be addressed after the deal closes. However, waiting until after an acquisition to diagnose and fix marketing inefficiencies can lead to lost time in the first 100 days post-acquisition. It also risks uncovering fundamental issues in the company’s go-to-market that may make you wish you had walked away from the deal. Understanding marketing challenges upfront allows investors to factor them into the deal structure or plan for immediate post-close improvements.
Lack of marketing expertise in traditional due diligence teams
Due diligence teams are typically composed of financial analysts, legal experts, and operational consultants who typically do not have deep expertise in marketing. However, any team can now access marketing expertise through marketing due diligence engagements with specialist providers and self-serve tools such as Inquisio, which can give investors instant access to marketing performance data on any target company, alongside expert commentary on the opportunities and challenges this analysis uncovers.
Why Marketing Due Diligence is Essential in Today’s Investment Market
In today’s competitive market, marketing plays a direct and measurable role in a company’s success. Here’s why marketing due diligence is becoming a key differentiator for smart investors:
Marketing directly impacts growth potential
A company’s ability to acquire and retain customers determines its long-term viability. If marketing efforts are ineffective or underfunded, even the strongest product or service may struggle to attract and retain customers. On the other hand, a well-executed marketing strategy can drive sustainable, scalable and predictable growth.
Marketing spend efficiency impacts profitability
Marketing isn’t just an expense—it’s an investment. How efficiently a company converts marketing spend into revenue directly affects EBITDA and long-term profitability. Without a detailed understanding of a company’s CAC, payback period and ROI, investors risk acquiring a company that requires far more capital to maintain growth than initially projected.
Marketing data is essential for accurate revenue projections
Revenue forecasts are only as strong as the data behind them. Many projections assume steady customer acquisition and retention without accounting for the effectiveness (or inefficiencies) of the marketing engine driving those numbers. By analyzing marketing data—such as conversion rates, pipeline velocity, and channel performance—investors can validate revenue assumptions and ensure projections are grounded in reality.
The Risks of Skipping Marketing Due Diligence
The pressure to progress quickly from LOI to close often means marketing due diligence gets overlooked. However, failing to thoroughly assess a company’s marketing function can lead to costly miscalculations, putting your investment at risk of underperforming. We’ve helped leading PE firms save millions of dollars on deals they’ve walked away from due to the insights we uncovered during marketing due diligence. Here are the main risks of foregoing Marketing Due Diligence.
Underestimating the investment you need to hit revenue targets
Growth doesn’t happen without a solid marketing engine, and generating more closed-won deals requires a steady flow of high-quality marketing-qualified leads (MQLs). Without a clear understanding of the marketing investment required to generate those leads, you risk acquiring a company that either struggles to meet its revenue targets or requires far more marketing budget than planned—ultimately cutting into EBITDA margins.
Relying on unsustainable or ineffective marketing channels
Many companies appear to have strong top-line growth, but without analyzing their marketing data, you could be relying on channels that have already peaked, are too expensive to scale, or generate leads that don’t convert into revenue. If marketing spend is funneled into underperforming channels post-acquisition, your growth expectations may quickly prove unrealistic.
Building the wrong investment thesis
A strong investment thesis is built on a deep understanding of a company’s biggest opportunities. Without marketing due diligence, investors risk missing key insights into customer acquisition trends, market positioning, and competitive advantages—leading to a thesis that focuses on ineffective growth levers.
Losing valuable time in the first 100 days
Post-acquisition momentum is critical, particularly in the first 100 days post-close. Investors who skip marketing due diligence often spend the early months scrambling to understand where quick wins exist instead of executing on them. A proactive approach ensures you’re ready to start adding value as soon as the deal closes.
Planning for mergers that will deliver minimal value
When acquiring a company as part of a larger platform strategy, it’s critical to understand how it fits into your existing ecosystem. Without marketing due diligence, investors risk overestimating synergies, underestimating integration challenges, or missing out on opportunities to create efficiencies. A full assessment of the target company’s growth engine, competitive positioning, and marketing scalability is essential to ensure the deal delivers real value.
Not investing in companies that have huge growth potential
Some companies that investors dismiss as weak investments have the potential to significantly increase their enterprise value with small but strategic changes—such as refining messaging, reallocating spend, or unlocking new channels. Marketing due diligence helps you see beyond the surface, identifying opportunities that may otherwise be missed.
Final thoughts
Marketing due diligence is no longer optional—it’s a crucial part of making smart investment decisions. Overlooking it can lead to missed growth opportunities, wasted investor resources, and disappointing exits. On the other hand, a thorough marketing assessment helps investors spot risks early, refine their investment thesis, and unlock untapped value.
As competition in the market grows, the firms that prioritize marketing due diligence will have a clear edge—making better acquisitions, scaling more effectively, and ultimately driving stronger returns.
To see how you can get instant, data-driven marketing due diligence reports for your prospective acquisitions, book your custom demo of Inquisio. You’ll see how to quickly assess if your target acquisition can grow and deliver ROI with millions of proprietary data points that uncover challenges, opportunities and how it compares to competitors.
