What operational due diligence catches that financial diligence misses
Financial diligence tells you whether the numbers add up. Operational diligence tells you whether they will hold.
By Navex Capital
Most diligence on a maritime or transport business is built around the model. The quality-of-earnings work confirms the EBITDA, the lawyers paper the risk, and the lender sizes the facility. All of it matters. None of it tells you whether the business can actually be run the way the model assumes.
The model is only as good as its assumptions
A financial model is a set of operating assumptions wearing a suit. Utilization holds at 92 percent. The two largest contracts renew. Crew costs rise with inflation, not faster. Drydock lands on schedule and on budget. Each of those is an operating call, not an accounting fact, and each is where an operator and a spreadsheet quietly disagree.
Five things a data room rarely shows
Pricing power. Is the margin a function of a genuine advantage, or of one customer who has not yet tested the market? We look at how rates are actually set and how much room there is when the cycle turns.
Contract quality. Revenue is not revenue. We read the contracts for tenor, indexation, termination rights, and counterparty strength, because a backlog is only as good as the parties standing behind it.
Utilization and crewing. In a people-and-asset business, the margin lives in deployment and manning. We test whether the assumed utilization is achievable with the crew, the maintenance windows, and the trade the business actually runs.
Asset condition and capex. Deferred maintenance is a loan from the future at a bad rate. We look past the survey date at real condition and the capex the next owner will inherit.
Management depth. One indispensable person is a risk, not a strength. We assess whether the team can deliver the plan and who actually carries the operation day to day.
Why maritime makes this harder
Asset cycles, charter exposure, regulation, and crewing all move on their own clocks, and they rarely move together. A business that looks cheap on last year's numbers can be expensive once you price the cycle it is sitting in, and one that looks fully valued can have real room an outsider would never see. Generic diligence treats these as footnotes. To an operator they are the thesis.
What it means for your thesis
Operational diligence does not replace the financial work. It pressure-tests the assumptions underneath it, before you commit, so the plan you underwrite is the plan that can be delivered. That is the work we lead with, because we have had to deliver it from inside the business, not from a deck.