Updated 26 October 2026. Pre-investment due diligence helps an investor test the claims, relationships and assumptions behind a proposed investment. Financial statements and a convincing presentation are starting points; the decision also depends on who controls the business, who will manage the capital and whose interests sit alongside yours.
For a family office or investment committee, the useful question is which facts could change the decision, the price or the terms. A defined scope makes those questions easier to investigate before the timetable leaves little room to respond.
This guide develops themes from Falcone International Founder Tobias Jaeger's 2023 article on six common due-diligence pitfalls, including management teams, co-investors, external dependencies and deal structure. It explains how to turn those concerns into an investigative brief.
A familiar business address or professional presentation provides context. Verification still needs to establish the legal entity, its controllers and the people making the claims.
1. Establish who is behind the investment
Record the legal name and jurisdiction of the entity receiving the investment, together with the manager, general partner or other entities that influence the decision. Trading names and group brands can obscure which organization owes an obligation or holds an asset.
Map the ownership and control information available from filings and transaction documents, and identify where it stops. A registered shareholder may be another entity rather than the ultimate owner. A filing records what was submitted; it does not, by itself, verify every underlying claim or establish that the position is unchanged.
Where a manager offers regulated services, check the relevant regulator's records and the specific permissions involved. The FCA's guidance on clone firms also recommends checking contact details against its records: a genuine registration number can be copied by someone impersonating the authorized business.
Verify the management team's actual role
Separate a person's claimed track record from the performance of organizations they worked for. Establish employment dates, responsibilities and the transactions for which they can reasonably claim responsibility, using independent records and appropriately scoped reference inquiries.
For a fund manager, ask which performance claims can be reconciled with records held by relevant administrators, auditors or other parties entitled to provide them. Distinguish realized outcomes from valuations and team results from individual attribution. Financial specialists should assess the calculations and valuation assumptions; investigative work tests the identities and representations around them.
2. Examine co-investors, conflicts and dependencies
A recognizable co-investor can lend credibility to a transaction, but their participation does not establish what they checked or whose interests their work protects. Identify the parties investing alongside you, their relationship to the manager and any different rights or incentives disclosed in the documents.
Look for connections between principals, vendors, advisers and related businesses that could affect decisions or the flow of fees. An association is a question to examine, rather than proof of misconduct. The useful finding explains the relationship, its evidence and its relevance to the proposed investment.
Extend the brief to dependencies that could materially affect the business. These may include a key supplier, a regulated market or a technology provider. The original article's concerns about regulatory change, vendors and cross-border communication belong here: decide who will assess each issue and how their findings reach the investment team.
3. Test the evidence and explain the gaps
A report should make it possible to distinguish an established fact from an allegation, an interpretation or an unanswered question. Record dates, jurisdictions and source limitations, especially when documents and interviews give different accounts.
- Identity: Match records using sufficient identifiers and context; a shared name is not enough to attribute a court case or company interest.
- Provenance: Establish where a claim originated. Several websites repeating one report do not provide several independent confirmations.
- Status: Check the outcome and current procedural position of relevant proceedings before describing what they establish about a person or business.
- Coverage: State which records were accessible, which periods were examined and which questions could not be resolved within the scope.
An absence of search results can reflect limited access, spelling differences or an incomplete record. It should not be presented as proof that no issue exists. A material discrepancy deserves further verification and, where appropriate, an opportunity for the relevant party to explain it.
A finding is most useful while the investment team can still investigate further, change the terms or decide not to proceed.
4. Use the findings before committing capital
Begin with the questions that could stop the transaction or materially change its terms. Expand the work as the proposal becomes clearer, rather than treating a preliminary search as a completed investigation or leaving every inquiry until closing.
Agree how findings will be delivered and who can act on them. Counsel and financial advisers can assess whether a verified issue calls for further disclosure, a contractual protection, a different structure or a decision to stop. Investigative findings inform those judgments; they do not determine investment suitability or replace legal, tax and financial advice.
A practical pre-investment due-diligence brief
A useful brief gives the investigator enough context to prioritize the work and tell you what is achievable. Include the following information before agreeing the scope:
- The proposed investment, decision date and facts that would change the committee's view.
- The target, manager, principals and co-investors, with known entity names, jurisdictions and relationships.
- The claims or discrepancies to test, plus the documents and prior checks already available.
- The required depth of source verification and any restrictions on contacting people.
- The intended report audience, escalation points and questions assigned to other advisers.
Record open questions alongside the decision rather than losing them in a summary marked complete. If the transaction proceeds, assign responsibility for any agreed follow-up and revisit material changes in management, ownership or other assumptions.
Discuss the scope of an investigation
Falcone's pre-investment due-diligence service explains how an engagement can examine the entities and people behind a deal, and what the resulting report can establish. Where the central question concerns a senior individual, executive background investigations may form part of the agreed scope.
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