When Due Diligence Saves Deals: Case Studies in Technical Advisory

Technical due diligence is often perceived as a box-ticking exercise — a necessary cost of doing a transaction rather than a source of genuine insight. The three case studies presented here challenge that perception. In each case, rigorous technical advisory work identified risks that were not apparent from the information provided by the vendor, and in each case the findings materially changed the outcome of the transaction — saving the buyer from a costly mistake or enabling the deal to be restructured on terms that reflected the true risk profile of the asset.

The first case involved a coal mine acquisition in Indonesia where the vendor's resource estimate, prepared by a local consultant, significantly overstated the recoverable reserves. Arkadia's technical team, engaged as independent due diligence advisor to the buyer, conducted a detailed review of the drilling data, geological modelling, and resource estimation methodology. The review identified systematic errors in the interpolation methodology that had inflated the resource estimate by approximately 35%. When presented with the findings, the vendor initially disputed them, but a subsequent independent review by a third party confirmed Arkadia's analysis. The transaction was restructured with a purchase price reduction of USD 180 million and a contingent payment mechanism linked to actual production performance.

The second case involved a gas-to-power project in Southeast Asia where the technical due diligence identified a critical flaw in the gas supply agreement. The agreement contained a force majeure provision that was drafted so broadly that the gas supplier could invoke it in circumstances that would not typically be considered force majeure under international standards. Given that the gas supply was the single most critical input to the project's revenue model, this provision represented an existential risk to the project's bankability. The finding enabled the buyer's legal team to renegotiate the force majeure definition before financial close, removing a risk that could have made the project unfinanceable.

The third case involved a mining asset in West Africa where environmental due diligence identified legacy contamination from historical mining operations that had not been disclosed in the vendor's information memorandum. The remediation liability was estimated at USD 45–70 million depending on the regulatory standard applied. The buyer used this finding to negotiate an escrow arrangement at closing that provided funding for remediation, protecting the buyer from bearing the full cost of a liability that had been created before their ownership.