Due Diligence Checklist
A comprehensive list of documents, records, and information that a buyer requests to verify the financial, legal, and operational health of a business before completing a purchase.
What is a Due Diligence Checklist?
A due diligence checklist is the structured list of items a buyer needs to review before finalizing a business acquisition. It covers every aspect of the company — financials, legal, operations, customers, employees, and assets — and serves as the roadmap for the due diligence process.
Buyers use the checklist to verify the claims made in the CIM and uncover risks that could affect the purchase price or deal structure.
Core Categories in a Due Diligence Checklist
Financial Due Diligence
- Three to five years of income statements, balance sheets, and cash flow statements
- Tax returns (federal and state) for the same period
- Accounts receivable and accounts payable aging reports
- Revenue breakdown by customer, product, and geography
- EBITDA adjustments with supporting documentation
- Working capital analysis
- Debt schedules and loan agreements
- Month-over-month revenue and expense trends
Legal Due Diligence
- Corporate formation documents (articles of incorporation, operating agreements)
- All contracts and agreements (customer, vendor, lease, employment)
- Pending or threatened litigation
- Intellectual property registrations (trademarks, patents, copyrights)
- Regulatory licenses and permits
- Representations and warranties from prior transactions
Operational Due Diligence
- Organizational chart and employee roster
- Key employee contracts, non-competes, and compensation details
- Standard operating procedures and process documentation
- Technology systems and software licenses
- Equipment lists with condition and maintenance records
- Facility leases and property details
Customer and Revenue Due Diligence
- Customer list with revenue by account
- Customer concentration analysis
- Customer contracts and renewal schedules
- Churn rates and retention metrics
- Sales pipeline and backlog
How Sellers Should Prepare
Preparation is the single most important factor in a smooth due diligence process. Sellers should:
- Organize documents early. Assemble everything in a virtual data room before the letter of intent is signed. Delays in providing documents erode buyer confidence.
- Pre-audit your own records. Review your financials for inconsistencies, missing documentation, or items that will require explanation.
- Prepare an EBITDA bridge. Document every add-back and adjustment with supporting evidence.
- Disclose known issues upfront. Surprises discovered during due diligence kill more deals than the underlying issues themselves.
Timeline and Process
Due diligence typically takes 30 to 90 days, depending on the size and complexity of the business. Smaller transactions may complete in three to four weeks, while larger deals can extend to six months. Having your documents organized and your team responsive directly reduces the timeline and keeps the deal on track.