Global private equity firms bring rigorous financial and legal due diligence frameworks to every deal, yet industry research suggests that 40 to 60% of acquisitions globally fail to deliver their expected value, with Bain’s 2025 Global Private Equity Report identifying operational and commercial issues, not financial modeling errors, as the single largest cause of post-deal underperformance. In India specifically, the gap is rarely in the numbers. It is in how those numbers are interpreted within the country’s distinct regional market dynamics.

Overreliance on Reported Market Size Data

Global firms frequently anchor investment theses on top-down market sizing reports that overstate addressable demand in India, particularly in consumer and retail categories, since these reports often extrapolate from urban, English-speaking consumer behavior that does not represent the broader market. With global PE dry powder now exceeding USD 2.5 trillion and median purchase multiples climbing toward roughly 12 times EBITDA, the margin for error on the underlying commercial thesis has narrowed considerably.

Underestimating Channel and Distribution Complexity

India’s distribution landscape, spanning traditional trade, modern retail, quick commerce, and direct-to-consumer channels, varies enormously by region and category. PE firms accustomed to

more consolidated distribution structures in mature markets often underestimate how much of a target company’s growth depends on relationships with specific regional distributors, relationships that may not transfer smoothly to new ownership or a professionalized management team.

Misreading Promoter Dependency

Many India-based mid-market companies still run heavily on relationships personally held by the founder or promoter, whether with key customers, suppliers, or regulators. Standard due diligence checklists often flag this as a governance risk without fully quantifying how much revenue or margin is actually at risk if the promoter’s involvement decreases post-transaction. This requires direct, structured conversations with the company’s top customers and suppliers, not just a review of the organization chart.

Treating Operational Due Diligence as a Documentation Exercise

EY’s 2026 outlook on India deal-making points to three converging trends reshaping operational due diligence: growing use of AI-driven analytical tools, deeper scrutiny of supply chain resilience, and

increasingly mandatory ESG compliance checks. Firms that still treat operational due diligence as a document-collection exercise, rather than a genuine stress test of how the business actually runs day to day, are the ones most likely to inherit problems that only surface after closing.

Regulatory and Compliance Nuance

India’s regulatory environment includes state-level variations in labor law, tax administration, and licensing that a purely national-level compliance review can miss. Global PE firms accustomed to more centralized regulatory regimes sometimes underestimate the operational cost of compliance gaps that surface only when a company scales past certain employee thresholds that trigger additional labor law obligations.

Talent Retention Risk After the Deal

Commercial due diligence in India needs to assess not just current management quality but the retention risk of key personnel following a change in ownership. Attrition among mid-level operational leaders immediately after an acquisition is a common and underappreciated cause of post-deal underperformance, particularly in sectors where personal relationships drive a large share of revenue.

What a Sharper Diligence Process Looks Like

Firms that consistently outperform in Indian deals combine global financial rigor with India-specific commercial insight: independent channel checks across multiple regions, direct interviews with customers and suppliers rather than management-provided references, explicit quantification of promoter and key-person dependency, and a state-by-state regulatory review rather than a single national compliance summary.

Conclusion

The mistakes global PE firms make in India are rarely about analytical capability. They stem from applying diligence frameworks calibrated for more homogeneous, mature markets to a country defined by regional variation, relationship-driven commerce, and regulatory nuance. As deal multiples climb and capital competition intensifies, firms that adapt their process to these realities are the ones most likely to see the returns they underwrote.

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