Key takeaways
- Due diligence is a verification process, not a request for a large folder of documents.
- Financial, operational, legal, commercial, and transition findings must be reconciled into one decision.
- Material risks should change price, terms, protections, financing, or the decision to proceed.
- The buyer should preserve a written record of assumptions, exceptions, and unresolved items.
Financial verification
- Reconcile tax returns, profit-and-loss statements, balance sheets, and bank activity.
- Test revenue trends, gross margins, payroll, owner compensation, and unusual expenses.
- Verify every material add-back and identify expenses that will continue after closing.
- Review accounts receivable, accounts payable, inventory, debt, liens, and working capital.
- Build a normalized earnings bridge from reported profit to buyer cash flow.
Customer and revenue quality
- Revenue concentration by customer, product, channel, geography, and contract.
- Recurring versus project-based or one-time revenue.
- Customer retention, churn, pricing power, pipeline, and backlog quality.
- Contracts that require consent or may terminate upon a change of control.
Operations and people
- Owner responsibilities and revenue relationships that may not transfer.
- Key employees, compensation, tenure, restrictive covenants, and retention risk.
- Documented processes, technology, vendors, licenses, and quality controls.
- Deferred maintenance, obsolete equipment, cybersecurity, and capacity constraints.
Legal and compliance
- Entity records, ownership, authority, permits, licenses, and good standing.
- Material contracts, leases, franchises, intellectual property, and change-of-control provisions.
- Pending or threatened litigation, claims, regulatory matters, and employment issues.
- Tax exposure, liens, environmental obligations, warranties, and contingent liabilities.
Transaction and financing readiness
- Confirm the asset or equity purchase structure and exact assets being acquired.
- Reconcile purchase price allocation, inventory treatment, working capital, and assumed liabilities.
- Ensure the financing structure passes DSCR, equity, liquidity, collateral, and program requirements.
- Document seller support, training, noncompete terms, holdbacks, earnouts, and indemnification protections.
Turn findings into decisions
Every material finding should be classified as resolved, accepted, mitigated, reflected in price or terms, or a reason not to close. A checklist is only useful when it changes the decision or the protections built into the transaction.
Decision rule
Do not close with an important risk labeled merely as “to be handled later.” Assign an owner, deadline, remedy, and closing condition.
Step 2 · Apply what you learned
Continue into a Professional Playbook
The guide explains the concept. The playbook turns it into a complete, documented workflow you can use on an actual client or investment assignment.
Step 3 · Test the actual transaction
Generate Deal Intelligence with Acqyrly
Enter the actual assumptions, compare scenarios, review decision metrics, and identify the questions that require better documentation.
Educational notice: This guide provides general educational information. It is not legal, tax, accounting, valuation, investment, or lending advice. Acqyrly analytical outputs and educational content do not constitute a loan approval or commitment.