What typically gets overlooked on a business acquisition due diligence checklist?

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Best... Sarah

The effect of add-backs on the business and what growth factor it could have played if it weren't an add-back.

The piece that is often overlooked or mis-judged relates to the expense of integrating the operations of two companies, including the expected resignation of key employees. You may find that the top Sales people in the entity you are acquiring have no desire to join your company. If you consider a standard 80-20 rule (80% of Sales is transacted by 20% of the Sales Force), and your 20 resigns, what have you purchased?

Social issues are toughest. Keep an eye on who will or will not get along, realizing that your own staff may be working to torpedo success in the deal.

Also watch for state and local tax issues, which typically are a bigger problem than federal.

After having managed many, many acquisitions, what I find missing time and again on a due diligence checklist is the human factor. It's never on a checklist, but it's the most important factor in acquiring a company (assuming that it's not just, e.g., technology that's being acquired). Everything can look great from a financial, legal, technological, geographical, etc. perspective, but most acquisitions fail due to cultural differences. Companies are about people. If the human element is ignored, there's a much greater likelihood that the acquisition will fail or will end up costing far more than expected.

I fully agree with the point on people. Also often underestimated are the costs of completing litigation/defense that is not indemnified and systems integration.