Starting the clock: deal basics

• Tell me briefly which of these situations best describes why you're running diligence now Options: Signed LOI with an exclusivity window, Competitive auction with bid rounds, Sell-side preparing vendor diligence, Internal review before an offer, Other
• Which deadline is fixed today for your next decision or bid round Options: Within 3 business days, Within 1 week, Within 2 weeks, 3-4 weeks, More than 4 weeks, No fixed deadline
• How long is the exclusivity window, if any Options: No exclusivity, 7 calendar days or less, 8-14 days, 15-21 days, 22-30 days, More than 30 days
• Who on your team will be the day-to-day point of contact for diligence Options: Investment lead / deal partner, Head of M&A or corporate development, CFO or finance lead, External adviser access point, Other
• Describe the one decision your investment committee must reach before exclusivity expires

Where the earnings story could surprise you

• What single earnings adjustment, if overturned, would change your offer price immediately Options: Adjusted EBITDA add-backs, Revenue recognition timing, One-off costs reclassification, Related-party revenue, Other
• Walk me through any past deals where an add-back or revenue recognition change shifted the economics late in the process
• Which revenue lines or customer segments feel least visible from the CIM or management summaries Options: Product A / service line, Geography or region, Channel (direct vs distributor), Large enterprise accounts, Other
• How many of the top 10 customers would you consider at risk for attrition in the next 12 months Options: 0, 1-2, 3-4, 5-6, 7-10, Unknown
• If a single customer represented more than 20% of revenue, would that alone pause your bid Options: Yes, would pause, Would request price protection, No, continue but adjust terms, Unsure

Data-room truth or fiction

• If the data room is missing transaction-level revenue or AR aging, could you still make a confident bid Options: Yes, confident, Only with additional work, No, cannot proceed, Unsure
• List the systems that house the finance and customer data we will need access to Options: Primary ERP or general ledger, CRM or sales system, Order management, Billing/invoicing system, Bank and treasury systems, Other
• How long does your IT or ops team typically take to grant full data-room access including downloadable extracts Options: Same day, 1-3 business days, 4-7 business days, More than 7 business days, Access constrained by legal review
• Do any compliance or privacy constraints prevent sharing redacted customer-level or transaction-level data Options: Yes, strict restrictions, Yes, possible with redaction and approvals, No, standard NDA is sufficient, Unsure
• What is the earliest date full, downloadable extracts must be available for you to meet the bid round Options: Within 3 business days, Within 7 business days, Within 14 business days, Later / flexible

Who will talk to us and who will not

• What would it mean to your investment committee if management declined substantive interviews Options: Serious concern, may pause, Raise price protection requests, Acceptable with stronger data support, Unsure
• List the finance and commercial roles we must interview during fieldwork and who currently controls their calendars Options: CFO / finance lead, Controller / accounting lead, Head of sales / commercial, Operations or supply lead, Head of legal or compliance, Other
• How many days of management availability can you commit during a two-week fieldwork window Options: 0-2 days, 3-5 days, 6-9 days, 10+ days
• Name the single conversation that must happen before your investment committee meets
• Can fieldwork start without the CFO if they are unavailable during exclusivity Options: Yes, proceed with deputy, Proceed but scope-limited, No, must wait for CFO, Unsure

What timeline would actually influence price

• What hard deadline would force you to accept the reported findings as final, for example a board or bid round date Options: Board meeting date, Next bid round deadline, Signing deadline in LOI, No hard deadline
• Select the first deliverable you need to brief the committee Options: Executive summary with headline adjustments, Adjustments schedule only, Integrated financial model, Full draft report
• How much time does your committee expect to review a draft report before the next negotiation round Options: Same day (hours), 1 business day, 2-3 business days, 4+ business days
• Tell me whether a two-day delay would close off your ability to negotiate price before exclusivity ends Options: Yes, would close off, Would still be possible, Would limit negotiation options, Unsure

Other routes you're considering

• What currently feels like the safest way to validate earnings and why does your team trust it
• Choose the options you have spoken to or intend to use for this diligence Options: Internal FP&A only, Target's auditors or vendor DD, An incumbent external adviser, Multiple external diligence firms, No other option yet
• What would have to be true about your internal team's analysis for you to not hire an external diligence partner
• Can any alternative realistically meet your delivery deadline and produce an adjustments schedule the committee will accept Options: Yes, No, Maybe but unproven
• Has anyone proposed solving this entirely in-house, and if so who is leading that proposal

Technical and legal gates that stop work

• Identify the regulatory, contract, or privacy rules that could stop us from seeing customer-level or transaction-level data Options: GDPR or regional privacy rules, Customer contracts forbidding disclosure, Vendor agreements limiting extracts, Government or export controls, None known
• Do you have a dedicated IT or data owner who will produce extracts and reconciling schedules Options: Yes, a single data owner, Yes, multiple people, No dedicated owner, Unsure
• Identify the internal approvers required before fieldwork can begin Options: Legal, Compliance, CFO / finance, CEO / board, Other
• Estimate the total staff hours your team can allocate to supporting data pulls and Q&A across the fieldwork period Options: <40 hours, 40-80 hours, 80-160 hours, >160 hours, Not able to commit yet
• Is there any formal legal review or board signoff that must happen inside exclusivity that could block access Options: Yes, legal review required, Yes, board signoff required, No formal reviews, Unsure

What the final report must achieve for your committee

• What single element must the report include for your committee to accept the findings without a follow-up audit Options: Quantified adjustments with support, Reconciled financial model, Customer concentration analysis, Clear working-capital normalization
• Select the report components you require on delivery Options: Executive summary with quantified adjustments, Detailed adjustments schedule and working papers, Integrated financial model reconciled to reported results, Customer concentration and commercial review, Management presentation and Q&A session, Other
• How do you prefer adjustments presented, as a consolidated schedule, line-item roll-forward, or source-to-report reconciliations Options: Consolidated schedule, Line-item roll-forward, Source-to-report reconciliations, Combination of the above
• Would you sign off on the billing milestone at report acceptance or require a separate quality review period before final payment Options: Sign at acceptance, Require 3-5 day review, Require longer review, Other
• Describe any templates or formats your investment committee requires when reviewing diligence findings

Agreeing next steps and communication

• Tell me about a time when advisor communication caused you to miss a negotiation opportunity
• Choose the meeting cadence that suits you during fieldwork Options: Daily 15-minute updates, Twice-weekly calls, Weekly status call, Ad-hoc as issues arise
• Who will receive deliverables and who must approve them internally Options: Deal lead and CFO, Investment committee only, Deal lead, CFO, and legal, Customized list (provide names later)
• Choose which you prefer if a deadline forces a trade-off between scope and speed Options: Adjustments-first narrow scope delivered early, Full coverage delivered later, Phased delivery with priorities
• Provide the preferred secure channel for sharing sensitive extracts and ad hoc Q&A Options: Existing VDR, Secure SFTP, Platform workspace with access controls, Encrypted email with controls, Other

• Quality of Earnings Report
• EBITDA Normalization Workpapers
• Working Capital Analysis and Target
• Revenue Concentration and Customer Risk Analysis
• Revenue Recognition and Contract Review
• Cost Structure and Expense Add-back Validation
• Historical Financial Recast and Adjusted Model
• Cash Flow and Free Cash Flow Analysis
• Vendor and Contractual Obligations Review
• Integration Cost and Run-Rate Synergy Estimate
• Purchase Price Adjustment Analysis and Inputs
• Management Presentation and Executive Summary

Quality of Earnings Report

• Do you have trial balances, general ledger exports, and year-end audited financial statements for the last three fiscal years available in the data room? Options: Yes, No
• How many months of interim management accounts and sub-ledgers (AR, AP, payroll) do you want included in the QoE cut-off review? Options: Most recent month, 3 months, 6 months, 12 months
• Which revenue streams should we test for margin quality (e.g., subscription recurring revenue, one-time project revenue, product sales)? Options: Recurring subscription, Project / professional services, Product / hardware, Channel sales / distributor
• Provide the customer aging report and cash-receipts listing that we should use to validate revenue collection and reserves.
• List the accounting policies and any recent restatement memos related to revenue recognition, capitalization of costs, or accruals in the last two years.
• Identify material one-off items (e.g., legal settlements, insurance recoveries, M&A-related costs) that you expect to be excluded from normalized EBITDA.
• What acceptance criteria will confirm we can finalize the QoE report (examples: complete GL for three years, validated AR aging to customer-level, at least one senior management interview completed)? Options: GL for 3 years available, Customer-level AR validated, Senior management interview scheduled, Data-room access without restrictions

EBITDA Normalization Workpapers

• Specify the payroll registers, commission schedules, and related-party transaction listings we should use to test recurring vs non-recurring compensation add-backs.
• Which cost centers or GL account ranges represent owner compensation, non-operating items, or discretionary spend that you expect to be adjusted?
• Provide the last 12 months of benefits and bonus accrual schedules to validate timing of cash vs accounting expense.
• Estimate the share of EBITDA tied to non-core activities (examples: legacy product lines, corporate investment income) that we should evaluate for permanent exclusion. Options: <5%, 5-15%, 15-30%, >30%
• Indicate any recent or planned headcount changes, furloughs, or restructuring that should be reflected in run-rate adjustments. Options: None planned, Reductions announced, Additions planned, Restructuring in progress
• Which vendor invoices or expense types require workpapers to substantiate one-time treatment (e.g., consultant invoices, relocation costs)?

Working Capital Analysis and Target

• How many years of accounts receivable aging, accounts payable aging, and inventory sub-ledgers will you provide for working-capital trend analysis? Options: 12 months, 24 months, 36 months
• Which inventory valuation layers and count sheets (e.g., FIFO layer detail, cycle count reports) should we use to test valuation and obsolescence? Options: FIFO detail, LIFO detail, Weighted average, Cycle count reports
• Which accounts receivable customer cohorts (top 10 by revenue, >90-day balances, concentration >X%) should be prioritized for collection risk analysis?
• List the vendor payment terms and any supplier consignment or vendor-managed inventory arrangements that affect payable timing.
• Identify seasonality patterns or pocket months (e.g., quarter- or year-end billing spikes) we should normalize when determining a working-capital target.
• Are there material deferred revenue or refundable deposits in the balance sheet that require cut-off testing at period end? Options: Yes, No

Revenue Concentration and Customer Risk Analysis

• Provide your customer master extract with annualized revenue by customer for the last 12 months so we can identify top-concentration accounts.
• Which customers have contractual renewal terms, volume commitments, or minimum purchase guarantees we should review for revenue stability?
• How many of the top 20 customers have a written service-level agreement or contract that includes termination clauses, notice periods, or change-in-control provisions? Options: 0, 1-5, 6-10, 11-20
• Which customer cohorts require credit-review workpapers (e.g., >10% of revenue, >30-day AR, international customers)?
• Describe any recent material customer churn events, large contract non-renewals, or concentration mitigation steps taken by management.
• Identify third-party data or KPIs we should use to triangulate customer health (examples: usage metrics, subscription monthly recurring revenue trends, churn by cohort).

Revenue Recognition and Contract Review

• Which representative customer contracts, purchase orders, and master service agreements should we obtain to test revenue recognition across product and service lines?
• Which accounting policy manual or revenue-recognition memos (ASC 606 / IFRS 15 mapping) should we reference to validate policy application?
• How are multi-element arrangements currently allocated (e.g., standalone selling price, residual method) in your revenue systems? Options: SSP allocation, Residual method, Vendor-specific method, Other
• Specify any large contract modifications or change orders in the past 12 months that might impact revenue deferral or recognition timing.
• Are there subscription analytics or usage logs (API call volume, active seats) we can access to test recognized revenue against actual delivery? Options: Yes - logs available, Partially available, No
• Identify the systems of record for contracts and billing (examples: ERP sales ledger, subscription billing system) we should map to the GL.

Cost Structure and Expense Add-back Validation

• Which supplier contracts, contractor invoices, and vendor master extracts should we review to validate claimed one-time expenses?
• Specify the payroll register, payroll tax filings, and commission plans we should use to test compensation-related add-backs.
• Which discretionary spend categories (examples: marketing campaigns, travel, standing professional services) require trend analysis to determine run-rate treatment?
• Provide prior-year benchmarking or market-rate references for key cost categories if available (examples: SaaS hosting spend as % of revenue).
• Are there any related-party fees, shareholder loans, or director expense reimbursements that need separate validation and disclosure? Options: Yes, No
• Which internal approvals or policy documents (expense policy, capitalization thresholds) should we use to judge appropriateness of add-backs?

Historical Financial Recast and Adjusted Model

• Which historical management models, forecast files, and the live deal model should we receive to produce the recast adjusted model?
• How many historical periods (months/quarters/years) do you want recast into the adjusted model for trend and multiple calculation? Options: 12 months, 24 months, 36 months
• Specify the chart of accounts mapping file or mapping rules we should apply to convert source GL lines into the standardized adjusted P&L.
• Which non-cash items (examples: stock-based compensation, unrealized FX gains/losses) should be treated as adjustments in the recast model?
• Indicate whether you require sensitivity scenarios in the adjusted model (examples: revenue down 10%, margin restoration, worst-case churn) and which scenarios matter for the bid round. Options: No sensitivities, 1-2 scenarios, 3-5 scenarios, Custom scenario request
• Who will be the owner of final model sign-off and what file format do you require (Excel with formula trail, PDF summary)? Options: Excel with formulas, PDF summary, Both

Cash Flow and Free Cash Flow Analysis

• Provide bank statements, cash receipts journals, and disbursement listings for the latest 12 months to reconcile operating cash flow.
• Which capex schedules and fixed-asset ledgers should we use to separate maintenance versus growth capital in free cash flow calculations?
• Which working-capital assumptions from the adjusted model should be carried into the cash-flow build (AR days, AP days, inventory days)?
• Identify any cash tax payments, deferred tax movements, or one-off tax refunds in the last 24 months that should be treated outside recurring free cash flow.
• Estimate the expected timing of vendor payment runs, payroll cycles, and large customer collections (examples: monthly 25th, quarterly on quarter end) that affect near-term liquidity.
• Are there any committed financing lines, covenant triggers, or escrow holds we should model in projected cash flows? Options: Yes, No

Vendor and Contractual Obligations Review

• Which supplier contracts, service-level agreements, and minimum-purchase commitments should we obtain to assess contractual obligations and termination exposure?
• Provide the schedule of capital leases, equipment finance agreements, and loan covenants that might constitute off-balance-sheet obligations.
• Which vendor concentration metrics (top 10 suppliers by spend, single-supplier >X% of spend) should trigger deeper continuity risk analysis? Options: Top 5 vendors, Top 10 vendors, Single vendor >10%
• List any change-of-control, step-up, or reprice clauses in key supplier contracts that could activate on a transaction close.
• Are there outstanding indemnities, pending litigation reserves, or earnout obligations recorded in the cap table or balance sheet schedules we should assess? Options: Yes, No
• Which contract repositories or systems (example: contract management system, shared drive folder path) will we access for bulk contract extraction?

Integration Cost and Run-Rate Synergy Estimate

• Which functional integration areas do you expect to realize synergies from (examples: IT consolidation, SG&A overlap, supply-chain consolidation)? Options: IT consolidation, SG&A reduction, Procurement savings, Operational consolidation
• Provide historical spend by function (IT, HR, Sales, Marketing) and any run-rate targets management has proposed for post-close rationalization.
• Estimate one-time integration cost categories you expect (examples: severance, systems migration, consulting) and provide any vendor quotes or internal estimates.
• Which integration timing horizon should we model for run-rate synergies (6 months, 12 months, 24 months)? Options: 6 months, 12 months, 24 months
• Identify regulatory or IT dependencies that would delay realization of synergies (examples: data-migration windows, license terminations, cross-border approvals).

• Engagement Letter
• Master Services Agreement (MSA)
• Statement of Work (SOW)
• Non-Disclosure Agreement (NDA)
• Data Access Authorization
• Data Processing Agreement (DPA)
• Management Interview Consent
• Fee Schedule & Payment Terms Addendum

• Fieldwork Kickoff and Data Access Confirmation
• Data-room Detailed review and Anomaly Triage
• Preliminary EBITDA Adjustments Working Session
• Management Interview Series and Evidence Confirmation
• Interim Findings Synthesis and Prioritization

• Log interview notes and capture any verbal confirmations in writing with timestamps or meeting recordings.
• Reconfirm engagement scope and success criteria
• List and circulate the specific evidence required to raise an adjustment to final status.
• Flag any adjustments that require external accounting or legal input for separate review.
• Finance interview on recognition, adjustments, and one-offs
• Management confirmations and clarifications for each high-priority anomaly are recorded and dated.
• A concrete list of outstanding evidence with delivery deadlines is agreed.
• Any alternative explanations that materially change an adjustment are documented for re-evaluation.
• Issue the agreed outstanding evidence list with specific file naming and deadline requirements.
• Update the preliminary adjustments schedule based on management input and re-calculate impacts where necessary.
• Recap consolidated anomalies and preliminary adjustments
• Interim findings to be included in the draft report are ratified with estimated impacts and confidence levels.
• A prioritized resolution plan with deadlines for all open items is agreed.
• A delivery timeline for the draft report and management presentation is confirmed.
• Publish the interim findings memo with the agreed preliminary adjustments, working-capital normalization, and concentration flags.
• Circulate the prioritized resolution plan with deadlines for all outstanding evidence and disputed items.
• Confirm the draft report delivery date and schedule the management presentation.
• A prioritized data request list with clear deadlines and access confirmations is agreed upon.
• Data-room access issues and restrictions are documented and scheduled for resolution.
• Communication and escalation protocol for fieldwork is documented and accepted.
• Publish the prioritized data request list with submission deadlines and file format requirements.
• Document and escalate any data-room access restrictions requiring intervention.
• Share the agreed communication protocol and update schedule with all parties.
• Review revenue schedules and contract evidence
• An anomalies log is produced that links each finding to specific data-room documents.
• Top-priority follow-ups are identified and ranked by impact on EBITDA or transaction value.
• A short list of missing documents required to validate the top anomalies is agreed.
• Deliver the annotated anomalies log with direct links to supporting documents where available.
• Issue targeted follow-up document requests for the top-priority anomalies.
• Prepare interview question sets tied to each high-priority anomaly for the management interviews.
• Present candidate EBITDA add-backs and deductions
• A preliminary adjustments schedule with estimated dollar impact and confidence levels is agreed.
• A clear list of adjustments requiring additional evidence or external review is documented.
• A timeline to resolve outstanding adjustments before drafting the report is set.
• Publish the preliminary EBITDA adjustments schedule with supporting working papers and confidence annotations.
• Validate data-room inventory and access levels
• Validate evidence and flag disputed adjustments
• Present working-capital normalization and concentration analysis
• Commercial interview on customer concentration and contract terms
• Assess general ledger, trial balance, and key reconciliations
• Finalize prioritized data request list with deadlines
• Review open items, disputed adjustments, and evidence gaps
• Quantify impact and sensitivity ranges
• Run preliminary analytics for trends and outliers
• Operations interview on working-capital drivers and inventory practices
• Document commitments and outstanding evidence timeline
• Consolidate anomalies and prioritize follow-up actions
• Agree communication protocol and evidence standards
• Classify adjustments by resolution path
• Set the go-forward plan, responsibilities, and timeline to finalize the draft report

• desired_state
• current_state
• stakeholders
• gaps
• success_criteria
• decision_readiness
• desired_state
• decision_readiness
• current_state
• success_criteria
• gaps
• stakeholders
• desired_state
• success_criteria
• stakeholders
• gaps
• current_state
• decision_readiness
• decision_readiness
• decision_readiness
• decision_readiness
• decision_readiness

• Transmit final due-diligence report and supporting appendices to client
• Confirm written receipt of report from designated client contact
• Receive documented corrections or clarifications from client
• Incorporate agreed corrections and produce a change log
• Obtain written acceptance sign-off on the final report version
• Deliver management presentation deck and associated exhibits
• Receive client confirmation that the presentation aligns with the final report
• Issue invoice tied to the delivery billing milestone
• Obtain client acknowledgment of the billing milestone and payment arrangement
• Archive acceptance artifacts and close delivery acceptance record

• Post-Delivery Closeout (week 1-2)
• Implementation Readiness Review (weeks 4-6)
• 90-Day Progress and Roadmap Endorsement (around day 90)
• Quarterly Follow-up and Outstanding Issue Burn-Down

• Circulate the updated owners list and next-step plan before the next quarterly review.
• Secure endorsement of the implementation roadmap or capture required adjustments with agreed timelines.
• Agree the next-decision milestone and the information required to support that decision.
• Update and circulate the endorsed roadmap with revised timelines and dependencies.
• Compile residual evidence or analyses requested to shore up findings where acceptance is incomplete.
• List decision inputs required for the next milestone and their due dates.
• Open issue burn-down review
• Reduce the count of open high-priority items through closure or documented escalation paths.
• Ensure a client-side owner is assigned and confirmed for every remaining initiative.
• Agree a short remediation plan for any items needing more than two weeks to resolve.
• Close resolved items in the shared tracking register and archive completed documentation.
• Create escalation tickets for items not resolvable within the agreed two-week window.
• Confirm Delivery Acceptance record
• Confirm that Delivery Acceptance sign-off is recorded and note any documented corrections.
• Produce a prioritized action list with the initial prioritized action count and urgency levels.
• Identify any critical implementation blockers requiring immediate remediation and note resolution target dates.
• Publish the prioritized action list to the shared channel with proposed resolution timelines.
• Provide any requested supporting schedules or data files identified during clarifications.
• Log all follow-on requests into the shared tracking register for transparent status updates.
• Status of prioritized initiatives
• Update the prioritized action count with current status for each item.
• Resolve or set firm resolution dates for all high-impact implementation blockers.
• Confirm a named client-side owner is assigned to every prioritized initiative or document the plan to assign one.
• Publish an updated initiative tracker with status, target resolution dates, and any ownership gaps noted.
• Document technical or data tasks required to remove outstanding blockers and list required inputs.
• Schedule targeted working sessions for initiatives with multi-week remediation plans.
• Summary of progress against prioritized list
• Document the current findings acceptance rate and any outstanding concerns affecting confidence in the findings.
• Clarify report items and documented corrections
• Blocker resolution review
• Blocker detailed review
• Owner verification and handover status
• Confirm owner assignments
• Capture follow-on requests and rank priorities
• Residual follow-on request log
• Roadmap endorsement or adjustments
• Decide closure or escalation
• Define next-decision moment
• Agree next steps and interim milestones
• Agree immediate remediation steps and checkpoints