What is due diligence? A checklist before a business deal

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Control data-room access and do not publish confidential deal documents.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.