Financial Due Diligence Playbook

Financial due diligence is a delicate procedure to determine the stability of a company's assets and evaluate financial health. In this template, you'll find key tasks to perform during that process.

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What Tasks does the 

Financial Due Diligence Playbook

 Include

General information

  • Audited financial statements of the company for the historical period
  • Reconciliation of the management accounts for the historical period
  • Investment agreements executed by the company
  • Copy of TAN, VAT, and other registration certificates
  • Cash flow statement
  • Details of any changes made in accounting policies
  • Working capital details for each quarter, and reasons for significant variation
  • Partnership agreements and technical collaborations
  • Overview of any changes in the shareholding pattern in the last two years
  • Monthly operational statistics
  • A detailed description of the business model of the company/organization
  • Revenue streams - current and future streams
  • A detailed description of the product and services offered

Revenue and Customers

  • Monthly and quarterly revenue
  • Revenue recognition policy
  • An up-to-date schedule of unbilled revenue with customers
  • Major commercial terms agreed with customers

Human Resources

  • Details of retirement benefits and bonuses for senior management
  • Copies of the employment contracts for all employees
  • Attrition rates and staff turnover - valid reasons should be provided for the movement of employees
  • Details of salary increments
  • Details of key open positions in the business

Expenses

  • Ledger accounts of all revenue accounts and major expenses
  • Breakdown of legal expenses, professional charges, and taxes
  • Quarterly marketing expenses
  • Quarterly technology and management expenses

Transaction and related parties

  • Copies of all contracts with related parties
  • List of affiliated parties specifying the nature of the relationships with said parties and companies
  • Details of transactions (e.g. purchase, sales, and loans to or from)
  • Details of resources and facilities shared with other businesses
  • General ledger accounts of related parties

Operations

  • Summary of all material capital expenditure projects.
  • Summary of all capital expenditures planned in the next 12 months.
  • Asset register and/or copy of latest physical inventory of equipment and assets.
  • Schedule of equipment split by capital vs. operating lease.

Insurance costs

  • Summary of all current insurance coverages and copies of all policy documents related thereto.
  • Summary of claims made against any insurance policy.

FAQ

What Is Due Diligence?

Due diligence is a critical aspect of any deal that begins very early in the process and can continue right up until closing. During due diligence, the potential buyer asks questions and requests documentation from the seller that helps the buyer understand the target company and its business. These requests are usually general to start and become more specific as the buyer develops a greater understanding of the target. Buyers use the information provided by the seller to evaluate the opportunities and risks associated with the potential transaction. It is important for sellers to stay organized throughout the process. Buyers often submit thorough, detailed request lists that require input from numerous members of the seller’s deal team.

What is a due diligence checklist?

As the name implies, a due diligence request list is a list of questions and requests for information and documentation that a buyer submits to a seller in order to learn about the target company, its business and its operations. The initial diligence request list tends to be broad and typically includes an extensive list of questions covering a wide range of subjects. This allows the buyer to gain a broad understanding of the target company and identify key issues that can be investigated and considered more closely. Because every deal is different, due diligence request lists have to be tailored to meet the needs of the buyer and address the unique circumstances of your transaction.
However, there is a variety of fundamental requests that are relevant in most deals. These are the types of requests that our templates are designed to address.

What Questions Does the Master Due Diligence Questionnaire Include?

As the name implies, a due diligence request list is a list of questions and requests for information and documentation that a buyer submits to a seller in order to learn about the target company, its business and its operations. The initial diligence request list tends to be broad and typically includes an extensive list of questions covering a wide range of subjects. This allows the buyer to gain a broad understanding of the target company and identify key issues that can be investigated and considered more closely. Because every deal is different, due diligence request lists have to be tailored to meet the needs of the buyer and address the unique circumstances of your transaction.
However, there is a variety of fundamental requests that are relevant in most deals. These are the types of requests that our templates are designed to address.

Key considerations when using our m&a due diligence template

Our templates are drafted to provide an inclusive and wide-ranging list of initial due diligence requests. However, the templates, as well as the information contained therein, are not legal advice. They are not complete, and they are not specific to your transaction. The templates are designed to elicit general information from the seller that will provide the buyer with a broad overview of the target and it’s business and operations. You should review any template before using it, and it may need to be modified to ensure that it is suitable and relevant to your circumstances. Information provided by the seller will likely trigger additional questions that focus on specific aspects of the target’s business and issues identified during the due diligence process.

Are the requests in the template comprehensive?

No. Our Due Diligence Checklist is drafted to include typical requests that are relevant in most transactions. However, every deal and every target company is unique. Before utilizing any template, it is important that you review it with the help of your legal and other professional advisors to ensure that the requests are complete and tailored to the specific circumstances of your deal.

How to use the template with Dealroom

  • Start 14-day Free Trial of DealRoom and sign-up
  • Select a Master Due Diligence Template while creating a new room
  • Start assigning, adding to, and completing due diligence requests with needed documents by uploading them into the built-in virtual data room. The Requests tab is automatically populated with the requests from the due diligence template.

Can I change requests in this checklist or add new?

Every M&A process is different. Downloaders are urged to make these checklists their own by changing the providing information to better fit their needs.

Does this questionnaire provide all the necessary integration information?

This checklist was created by and for M&A professionals. It includes a comprehensive starting point for the integration process. However, every deal is different and may require additional requirements and tasks.

How to use this template with DealRoom?

  • Start 14-day Free Trial of DealRoom and sign-up
  • Select an Integration Template while creating a new workspace
  • Start planning, assigning, adding to, and completing integration tasks. The Requests tab is automatically populated with the tasks from the integration template.

Key considerations when using our m&a due diligence template

Our templates are drafted to provide an inclusive and wide-ranging list of initial due diligence requests. However, the templates, as well as the information contained therein, are not legal advice. They are not complete, and they are not specific to your transaction. The templates are designed to elicit general information from the seller that will provide the buyer with a broad overview of the target and it’s business and operations. You should review any template before using it, and it may need to be modified to ensure that it is suitable and relevant to your circumstances. Information provided by the seller will likely trigger additional questions that focus on specific aspects of the target’s business and issues identified during the due diligence process.

Are the requests in the template comprehensive?

No. Our Due Diligence Checklist is drafted to include typical requests that are relevant in most transactions. However, every deal and every target company is unique. Before utilizing any template, it is important that you review it with the help of your legal and other professional advisors to ensure that the requests are complete and tailored to the specific circumstances of your deal.

How to use the template with Dealroom

  • Start 14-day Free Trial of DealRoom and sign-up
  • Select a Master Due Diligence Template while creating a new room
  • Start assigning, adding to, and completing due diligence requests with needed documents by uploading them into the built-in virtual data room. The Requests tab is automatically populated with the requests from the due diligence template.

Financial Due Diligence Playbook

Financial due diligence is a delicate procedure to determine the stability of a company's assets and evaluate financial health. In this template, you'll find key tasks to perform during that process.

Financial Due Diligence Playbook

Financial due diligence is a delicate procedure to determine the stability of a company's assets and evaluate financial health. In this template, you'll find key tasks to perform during that process.

This template comes with Single Project plan and above
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  • Audited financial statements of the company for the historical period
  • Reconciliation of the management accounts for the historical period
  • Investment agreements executed by the company
  • Copy of TAN, VAT, and other registration certificates
  • Cash flow statement
  • Details of any changes made in accounting policies
  • Working capital details for each quarter, and reasons for significant variation
  • Partnership agreements and technical collaborations
  • Overview of any changes in the shareholding pattern in the last two years
  • Monthly operational statistics
  • A detailed description of the business model of the company/organization
  • Revenue streams - current and future streams
  • A detailed description of the product and services offered
  • Monthly and quarterly revenue
  • Revenue recognition policy
  • An up-to-date schedule of unbilled revenue with customers
  • Major commercial terms agreed with customers
  • Details of retirement benefits and bonuses for senior management
  • Copies of the employment contracts for all employees
  • Attrition rates and staff turnover - valid reasons should be provided for the movement of employees
  • Details of salary increments
  • Details of key open positions in the business
  • Ledger accounts of all revenue accounts and major expenses
  • Breakdown of legal expenses, professional charges, and taxes
  • Quarterly marketing expenses
  • Quarterly technology and management expenses
  • Copies of all contracts with related parties
  • List of affiliated parties specifying the nature of the relationships with said parties and companies
  • Details of transactions (e.g. purchase, sales, and loans to or from)
  • Details of resources and facilities shared with other businesses
  • General ledger accounts of related parties
  • Summary of all material capital expenditure projects.
  • Summary of all capital expenditures planned in the next 12 months.
  • Asset register and/or copy of latest physical inventory of equipment and assets.
  • Schedule of equipment split by capital vs. operating lease.
  • Summary of all current insurance coverages and copies of all policy documents related thereto.
  • Summary of claims made against any insurance policy.

Prepare for your due diligence

DealRoom’s financial due diligence template is designed to help teams have an efficient due diligence process from the beginning. By providing your team with a premade professional financial diligence checklist, you can get a jump start on fulfilling diligence requests.

The template can act as a guide for common diligence requests categories such as general information, revenue and customers, HR, expenses, transaction and related parties and more. And when you use a diligence tracker inside DealRoom, everything will be in one centralized space.

General information

  • Audited financial statements of the company for the historical period
  • Reconciliation of the management accounts for the historical period
  • Investment agreements executed by the company
  • Copy of TAN, VAT, and other registration certificates
  • Cash flow statement
  • Details of any changes made in accounting policies
  • Working capital details for each quarter, and reasons for significant variation
  • Partnership agreements and technical collaborations
  • Overview of any changes in the shareholding pattern in the last two years
  • Monthly operational statistics
  • A detailed description of the business model of the company/organization
  • Revenue streams - current and future streams
  • A detailed description of the product and services offered

Revenue and Customers

  • Monthly and quarterly revenue
  • Revenue recognition policy
  • An up-to-date schedule of unbilled revenue with customers
  • Major commercial terms agreed with customers

Human Resources

  • Details of retirement benefits and bonuses for senior management
  • Copies of the employment contracts for all employees
  • Attrition rates and staff turnover - valid reasons should be provided for the movement of employees
  • Details of salary increments
  • Details of key open positions in the business

Expenses

  • Ledger accounts of all revenue accounts and major expenses
  • Breakdown of legal expenses, professional charges, and taxes
  • Quarterly marketing expenses
  • Quarterly technology and management expenses

Transaction and related parties

  • Copies of all contracts with related parties
  • List of affiliated parties specifying the nature of the relationships with said parties and companies
  • Details of transactions (e.g. purchase, sales, and loans to or from)
  • Details of resources and facilities shared with other businesses
  • General ledger accounts of related parties

Operations

  • Summary of all material capital expenditure projects.
  • Summary of all capital expenditures planned in the next 12 months.
  • Asset register and/or copy of latest physical inventory of equipment and assets.
  • Schedule of equipment split by capital vs. operating lease.

Insurance costs

  • Summary of all current insurance coverages and copies of all policy documents related thereto.
  • Summary of claims made against any insurance policy.

How DealRoom can help you execute due diligence

By using our master due diligence template, alongside DealRoom’s M&A lifecycle management software, you can create a smooth diligence process.

How DealRoom can help you execute integration

By using our integration template, alongside DealRoom's M&A lifecycle management software, you can create a smooth integration process

With this solution you’ll receive:

Professional template

with requests that are specific to your transaction type. Our platform allows you to add new requests as they pop up, track progress, collaborate and more.

A built-in data room

allowing you to link corresponding documents to the diligence requests and keep all the information safe.

Project management capabilities

that enable your team, client and other parties to work together and set priorities during the diligence.

Collaboration tools

to eliminate long email threads. Team members can add comments and tag other each other on requests.

More Templates

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Decisions and Change Requests Template

Master Due Diligence Playbook

Highly effective M&A teams choose DealRoom to manage their transactions end-to-end

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