M&A & funding
Pre-deal business due diligence checklist: what to check
Innovexsis Consulting LLP ·
Due diligence tests the evidence behind a proposed deal. It should change the decision, terms or risk controls—not merely fill a document folder.
What is due diligence?
Due diligence is a structured investigation of facts, assumptions and risks before committing to a transaction. A buyer may use it to check whether the business matches the seller's account and whether the price and obligations remain appropriate.
Its depth depends on the transaction, jurisdiction and identified risks. Commercial, financial, legal, tax, technology and operational reviews may need different qualified specialists.
Start with the investment rationale
Write down why the deal makes sense and what would cause you to pause. Link each diligence question to that rationale rather than treating every document as equally important.
- Commercial: customer concentration, contract renewal, competition and demand assumptions.
- Financial: cash generation, working capital, debt, liabilities and quality of earnings.
- Legal and tax: ownership, material contracts, disputes and obligations for specialist review.
- Operational: key staff, suppliers, continuity and integration capacity.
- Technology and data: asset ownership, security, access rights and dependencies.
Keep an evidence and exceptions log
For each important question, record the evidence, its date, who supplied it and whether it has been independently checked. Mark missing documents and inconsistencies as unresolved rather than assuming they are harmless.
Control data-room access and do not publish confidential deal documents. An information gap is a reason for a follow-up question, a contractual protection or a change of decision.
Use findings to decide what happens next
Discuss whether findings affect valuation, funding requirements, completion conditions or the integration plan. Some risks can be managed; others may undermine the original rationale.
This is a general preparation checklist, not a legal opinion, valuation or investment recommendation. Obtain qualified legal, tax and financial advice for the particular transaction.
Frequently asked questions
What should be included in a pre-deal due diligence checklist?
A pre-deal checklist typically covers commercial performance, finances, ownership and material contracts, tax, operations, people, and technology and data. For each area, record the evidence needed, responsible reviewer, findings and unresolved questions. The scope depends on the business and proposed transaction.
How do you perform due diligence on a company?
Start by defining the purpose and scope of the review. Request relevant records, assign appropriate reviewers, compare management explanations with supporting evidence, and investigate discrepancies. Keep a findings log that distinguishes verified facts, assumptions, missing information and open questions. Specialist matters require appropriately qualified reviewers.
What are due diligence documents?
Due diligence documents are records used to verify information about a business. Examples include financial statements, ownership records, material contracts, tax records, employee information, operating reports and technology documentation. The required documents vary with the transaction and review scope.
How do you prepare for due diligence?
Agree the review scope, identify document owners and organise current records in a controlled-access location. Label files clearly, track missing or outdated information, and maintain a log of requests and responses. Sensitive information needs appropriate access controls and handling arrangements.
Sources & further reading
General information, not personalised legal, tax or investment advice. Eligibility, requirements and outcomes depend on your circumstances.