Early insight into internal controls helps M&A deal teams reduce post-close disruption and improve integration planning.

In brief

• Internal controls assessments provide early visibility into risks that may not surface during traditional diligence.
• Rigorous internal controls extend beyond audit considerations, supporting more reliable reporting, smoother integration and better planning decisions.
• By addressing internal control gaps earlier, deal teams can reduce disruption, allocate resources more effectively and move forward with greater confidence.

M&A activity is beginning to pick up, and internal controls assessments are becoming increasingly important as deal teams move quickly to pursue growth through acquisition. While deal activity faced economic headwinds earlier in 2025, momentum reaccelerated in the third quarter. The EY-Parthenon Deal Barometer forecast that US deal volume is set to grow through 2026, and recent transactions signal a continuing shift toward larger, more complex transactions.

How deal speed and scale are reshaping M&A risk

Deal teams already recognize that financial diligence validates the fundamentals, cyber diligence helps quantify exposure, and operational and IT diligence (when assessed) highlights risks in internal controls. The more practical question is whether the target can reliably run its processes and produce reporting outputs that can be trusted, both during integration and under increased scrutiny. This is where traditional diligence can be supplemented further with a deeper dive into internal controls in certain situations, leaving deal teams more prepared to respond to potential operational and reporting risks that may not have surfaced until after the transaction close.

Where an internal controls assessment strengthens M&A diligence

Internal controls are the routines, checks and accountability mechanisms that keep reporting dependable and provide confidence in the capital markets. They show up in everyday moments, such as who can approve a payment, how system access is granted, how changes are deployed and how key reports are validated before they are used for decision-making.

What is often overlooked is that internal controls rarely operate in isolation. They sit inside business processes and technology. If a company relies on system-generated reports for revenue, inventory or close, controls determine whether those reports are complete and accurate. If a company introduces frequent system changes, controls determine whether those changes are reviewed, tested and approved before they affect reporting. When ownership and governance are unclear, controls influence whether issues are surfaced early or allowed to drift until they become urgent.

For these reasons, internal control diligence is not simply an extension of audit work or a checkbox exercise. It helps deal teams understand whether the target’s control environment can support reliable operations and reporting at the pace the acquirer needs. That visibility also supports confidence across finance, technology and corporate development as integration plans take shape.

What happens when internal control gaps surface after close?

The most common challenge is not a single broken control but the compounding effect of multiple control gaps that affect the same systems and processes integration depends on. Immature internal controls can trigger remediation work, integration delays and financial reporting challenges at the same time. The result is rarely a onetime disruption. More often, it becomes a sustained drain on time, attention and momentum.

A familiar pattern tends to follow. A deal closes, and integration work begins. Teams then discover that key reports cannot be relied on without additional validation. Access management is inconsistent, making it unclear who has privileged access or whether it is reviewed. Change management is informal, allowing system changes to reach production without sufficient testing and clear approval trails. Deficiencies may be known, but tracking and ownership are unclear, so issues do not consistently move to closure. Over time, gaps that could have been manageable early can escalate into reporting issues that attract greater scrutiny, including those that rise to the level of material weaknesses.

This presents an opportunity to emphasize the importance of embedding internal control reviews into both operational diligence and integration planning workstreams. While certain integration activities may follow diligence, initiating internal control reviews during these phases allows them to begin well in advance of integration, preserving flexibility, reducing downstream risk and supporting a more seamless transition.

For an acquirer, the point is not to debate labels or classifications. The more important takeaway is that control gaps often cluster around the same themes that also create post-close friction, including the reliability of system outputs, discipline around access and change, and the ability to demonstrate that controls are operating consistently.

Why earlier visibility changes outcomes

A targeted internal controls assessment can fit within deal timelines when scoped thoughtfully and proactively. Rather than a full audit, it provides a current state view designed to surface issues early enough to inform decisions and planning. In practice, this relies on interviews, focused walk-throughs and review of existing documentation and audit issue logs.

The goal is to answer a set of practical questions. How mature is the governance model? Are deficiencies tracked and resolved consistently? Can key reports be trusted, and are they complete and accurate? Are IT access and change practices mature enough to support system reliability? Are core business processes documented and repeatable, particularly those tied to revenue, purchasing and close?

By identifying gaps early, deal teams have the time and clarity to plan rather than react as integration and reporting demands increase.