Free checklist

M&A Due Diligence Checklist

The request list a buyer sends after an offer is accepted, organised by workstream, with a note on what each item is for. It is written for a UK private-company share purchase and is a starting point to edit for the deal, not a substitute for the advisers who will run each workstream. In TrueValue the same list is a template you send to the seller and chase automatically.

Start my 14-day free trial Read the full guide

Financial

Establish what the business has earned, what it owns and owes, and what cash it produces — and whether the figures the offer was based on hold.

Historical accounts

  • Statutory accounts for the last three to five years, with audit reports where audited
  • Monthly management accounts for the current and prior year, with the reconciliation to statutory
  • The bridge from reported to adjusted EBITDA, with support for every adjustment
  • Revenue by customer, product and month; gross margin by product or service line
  • Aged debtors and creditors at each year end and at the latest month end

Cash, debt and working capital

  • Bank statements and facility agreements; all borrowings, leases and hire-purchase
  • Monthly working capital for at least twenty-four months, to set the completion target
  • Capital expenditure history and the maintenance versus growth split
  • Cash-flow forecast for the next twelve months and the assumptions behind it
  • Any off-balance-sheet liabilities, guarantees, deferred consideration or contingent items

Quality of earnings

  • Related-party transactions and the terms they are on
  • Non-recurring income and costs in each year, with evidence
  • Revenue recognition policy and any changes to it
  • Stock valuation method and provisions; work in progress

Legal and corporate

Confirm what you are buying, that the seller can sell it, and what obligations come with it.

Corporate

  • Certificate of incorporation, articles, statutory registers and Companies House filings
  • Share capital, share classes, options and any rights over shares; shareholder agreements
  • Group structure, subsidiaries and any dormant companies
  • Board minutes and shareholder resolutions for the last three years

Contracts

  • Customer contracts above a materiality threshold, with change-of-control and termination provisions
  • Supplier and distribution agreements; exclusivity, minimum-purchase and rebate terms
  • Property leases and licences; title documents for freehold property
  • Loan agreements, guarantees, security and any personal guarantees given by the seller

Disputes and compliance

  • Current, threatened or settled litigation, arbitration and regulatory action
  • Licences, permits and regulatory registrations needed to trade
  • Data protection: policies, register of processing, breaches, ICO correspondence
  • Intellectual property: registrations, licences in and out, ownership of developed IP
  • Insurance policies, claims history and any notified circumstances

Commercial

Test the market position and the customer relationships the earnings depend on.

Customers and market

  • Top twenty customers by revenue for each of the last three years, with contract status and renewal dates
  • Customer churn and retention; pipeline and order book with conversion history
  • Pricing history and the ability to pass on cost increases
  • Competitors, market share evidence and the basis for any market-size claims
  • Customer reference calls — with the seller's consent and timing agreed

Suppliers and operations

  • Top suppliers by spend and any single-source dependencies
  • Capacity, utilisation and the investment needed to grow
  • Quality systems, certifications and audit results
  • Health and safety records, incidents and enforcement

People, tax and IT

People

  • Organisation chart, headcount by function, tenure and cost
  • Contracts for directors and key employees; notice periods, restrictive covenants, bonus and commission schemes
  • Pension schemes, auto-enrolment compliance and any defined-benefit exposure
  • Contractors and consultants, and their employment-status risk
  • Grievances, disciplinaries and tribunal claims in the last three years

Tax

  • Corporation tax computations and returns for the last four years; HMRC correspondence and open enquiries
  • VAT returns and any partial-exemption or scheme positions
  • PAYE and NIC compliance; benefits in kind; IR35 assessments
  • Any tax planning, group relief, losses carried forward or R&D claims

IT and systems

  • Systems inventory, licences and support arrangements
  • Ownership and documentation of any bespoke software
  • Backup, recovery and security controls; incidents in the last three years
  • Dependence on the seller's personal accounts, devices or domains

How to use this list

Prioritise. A request list sent as a hundred undifferentiated items gets a hundred late answers. Mark what you need before exclusivity, what you need before the SPA is drafted and what can wait for completion, and send the first tranche first. Tie each item to the question it answers — the concentration flag from the memorandum, the adjustment you could not evidence — so the seller understands why it matters and your team knows what a satisfactory answer looks like.

In TrueValue this list is a template on every buyer deal: send it to the seller, who answers and uploads without an account; responses land against the item they answer; outstanding items are chased every five days automatically; evidence links to each item; and red flags found in what comes back are surfaced with the document they were read from. See M&A due diligence software.

Go deeper