Due Diligence Checklist

Workflow

Step 1: Scope the Diligence

Ask the user for:

• Target company: Name, sector, business model
• Deal type: Platform acquisition, add-on, growth equity, recap, carve-out
• Deal size / complexity: Determines depth of diligence
• Key concerns: Any known issues to prioritize (customer concentration, regulatory, environmental, etc.)
• Timeline: When is LOI / close targeted?

Step 2: Generate Workstream Checklists

Generate a checklist across all major workstreams, tailored to the sector:

Financial Due Diligence

• Quality of earnings (QoE) — revenue and EBITDA adjustments
• Working capital analysis — normalized vs. actual
• Debt and debt-like items
• Capital expenditure (maintenance vs. growth)
• Tax structure and exposure
• Audit history and accounting policies
• Pro forma adjustments (run-rate, synergies)

Commercial Due Diligence

• Market size and growth (TAM/SAM/SOM)
• Competitive positioning and market share
• Customer analysis — concentration, retention, NPS
• Pricing power and contract structure
• Sales pipeline and backlog
• Go-to-market effectiveness

Legal Due Diligence

• Corporate structure and org chart
• Material contracts (customer, supplier, partnership)
• Litigation history and pending claims
• IP portfolio and protection
• Regulatory compliance
• Employment agreements and non-competes

Operational Due Diligence

• Management team assessment
• Organizational structure and key person risk
• IT systems and infrastructure
• Supply chain and vendor dependencies
• Facilities and real estate
• Insurance coverage

HR / People Due Diligence

• Org chart and headcount trends
• Compensation benchmarking
• Benefits and pension obligations
• Key employee retention risk
• Culture assessment
• Union/labor agreements

IT / Technology Due Diligence (for tech-enabled businesses)

• Technology stack and architecture
• Technical debt assessment
• Cybersecurity posture
• Data privacy compliance (GDPR, CCPA, SOC2)
• Product roadmap and R&D spend
• Scalability assessment

Environmental / ESG (where applicable)

• Environmental liabilities
• Regulatory compliance history
• ESG risks and opportunities

Step 3: Status Tracking

For each item, track:

Status options: Not Started → Requested → Received → In Review → Complete → Red Flag

Step 4: Red Flag Summary

Maintain a running list of red flags discovered during diligence:

• What was found
• Which workstream
• Severity (deal-breaker / significant / manageable)
• Mitigant or path to resolution
• Impact on valuation or deal terms

Step 5: Output

• Excel workbook with tabs per workstream (default)
• Summary dashboard: % complete by workstream, outstanding items, red flags
• Weekly status update format for deal team

Sector-Specific Additions

Automatically add relevant items based on sector:

• Software/SaaS: ARR quality, cohort analysis, hosting costs, SOC2
• Healthcare: Regulatory approvals, reimbursement risk, payor mix
• Industrial: Equipment condition, environmental remediation, safety record
• Financial services: Regulatory capital, compliance history, credit quality
• Consumer: Brand health, channel mix, seasonality, inventory management

Important Notes

• Prioritize P0 items that are gating to LOI or close
• Flag items where the seller is slow to respond — may indicate issues
• Cross-reference data room contents against the checklist to identify gaps
• Update the checklist as diligence progresses — it's a living document