Key Takeaways
- Confirmation bias is the most dangerous DD pitfall—you unconsciously filter evidence to support the acquisition.
- Sunk cost bias makes you reluctant to walk away after spending $15-25K on DD—but those costs are irrelevant to the decision.
- The ten most costly pitfalls each have a corresponding preventive control in the DD process.
- Mandatory devil's advocate review and re-underwriting with DD findings are the most effective decision controls.
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Test Your Knowledge
1.What is confirmation bias in the context of due diligence?
2.What is the most effective control against cognitive biases in DD?
3.What is the "sunk cost fallacy" in deal due diligence?