What should private equity diligence test in an ecommerce business?

Answer: Ecommerce diligence should test whether reported growth is economically attractive, controllable and transferable to a new owner. That means validating channel-level contribution, marketplace concentration, advertising dependency, inventory quality, account ownership, channel leakage, unauthorized sellers, data integrity, key-person risk and operating documentation. Financial diligence alone can miss these issues because many sit between commercial, operational and technology functions. The objective is to identify risks that could change valuation, require post-close investment or weaken the investment thesis.

Why this matters

Ecommerce businesses can look healthy in consolidated financial statements while material operating dependencies remain hidden until late in a transaction.

What the board should examine

  • Channel economics and reconciliation to finance
  • Platform, SKU and customer concentration
  • Inventory aging and working capital
  • Paid-demand dependency
  • Account access and ownership
  • Distribution leakage and unauthorized sellers
  • Key-person and agency dependency

What good looks like

Diligence produces a clear view of what is durable, what is fixable, what must be priced into the deal, and what belongs in the first 100-day plan.

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