Once a term sheet is in place, buyers must conduct thorough due diligence to uncover potential risks and liabilities. In the aerospace and defense sector, due diligence extends beyond financials to regulatory compliance, security clearances, and intellectual property rights.

Financial & Contractual Review

Buyers should examine financial statements, revenue sources, and liabilities—paying special attention to government contracts. Are contracts compliant with FAR/DFARS regulations? Are there any pending audits or disputes that could impact revenue?

Regulatory & Compliance Considerations

Given the national security implications of aerospace and defense deals, compliance with ITAR/EAR and cybersecurity frameworks like CMMC is critical. Buyers should assess whether the target has unresolved regulatory violations that could delay or derail the deal.

Security & Intellectual Property Risks

Some intellectual property in the defense sector is developed with government funding, which may impose restrictions on its use. Additionally, companies with classified contracts must ensure personnel security clearances can be transferred post-acquisition.

A structured due diligence process helps buyers mitigate risks and avoid post-closing surprises.