Framework library · M&A and corporate strategy

M&A due diligence framework

Due diligence divides what a buyer needs to know into workstreams (commercial, financial, tax, legal, people, technology, operations, ESG and regulatory), each with an owner and a short list of questions. Its purpose is to find what changes the price, the contract or the decision, not to confirm the seller's story, so every finding is recorded with the effect it has on one of those three.

LevelIntermediate
TimeA day to set up the register; four to eight weeks of work between exclusivity and signing
Who to involveThe deal lead, one owner for each workstream drawn from the business and the advisers, and the executive who will run the business after closing.
Also calleddue diligence checklist, acquisition due diligence, buy-side due diligence, due diligence workstreams, vendor due diligence

Use it when

  • You have exclusivity on a target and a few weeks to decide whether to sign, at what price and on what terms.
  • Several advisers are working in parallel and you need one record of what each has asked, found and flagged.
  • The investment committee wants to see which findings moved the price or the contract, not a stack of adviser reports.
  • You are selling and want to run vendor due diligence so that the buyer's questions hold no surprises.

Avoid it when

  • You have not yet decided whether buying fits the strategy. Diligence tests one target. Settle the rationale first, for example with build, buy or partner.
  • The question is what the synergies are worth. Size them in a synergy assessment and feed the result into the financial workstream.
  • The deal has closed. Track the integration with a post-merger integration plan and an integration scorecard. This register stops at signing.
  • The target is small enough that a short checklist and a warranty package cover the risk. A full workstream structure would cost more than it finds.

How to run it

  1. Write the deal thesis and the walk-away price

    Before the data room opens, write in two sentences why you are buying, and the price above which you would not. Every question that follows tests one or the other.

  2. Set the workstreams and their owners

    Commercial, financial, tax, legal, people, technology and IP, operations, ESG and regulatory, each with one named owner. Drop any workstream that cannot change the answer for this target.

  3. Ask the questions that could change the answer

    For a tower portfolio that means ground leases, tenancy contracts and structural capacity, not a generic list of 300 items. Write each question so that it has a yes or no answer, or a number.

  4. Flag every finding and state its deal impact

    Set each finding's red flag to No, Watch or Yes, and say what it does: moves the price, needs a warranty or indemnity, becomes a condition before closing, goes into the integration plan, or ends the deal.

  5. Review the red flags together every week

    The deal lead and the workstream owners go through every Yes and Watch. Flags raised in different workstreams often share a cause that neither team can see alone.

  6. Close with a findings memo against the thesis

    Before signing, set out what the work confirmed, what it contradicted, and how the price and the terms moved as a result.

Work through it

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Mistakes to avoid

  • Treating diligence as confirmation of a deal already decided. Under deal momentum, teams explain red flags away. Agree before the work starts which findings would stop the deal.
  • Running the workstreams in isolation, so that the change-of-control clause found by the lawyers never reaches the revenue forecast built by the commercial team.
  • Working through a generic checklist and missing the two or three questions that matter for this particular target.
  • Recording findings with no deal impact. A finding that changes neither the price, the terms nor the decision belongs in the integration plan or nowhere.
  • Letting the diligence team disperse at signing. They know best what will be hard to integrate. Capture it in the integration plan before they move on.

Where it comes from

No single originator: organising due diligence by workstream is common practice in M&A, shaped by buyers, their advisers and their lenders. Geoffrey Cullinan, Jean-Marc Le Roux and Rolf-Magnus Weddigen argued that it should answer four questions: what are we really buying, what is the target's stand-alone value, where are the synergies and the skeletons, and what is our walk-away price ("When to Walk Away from a Deal", Harvard Business Review, April 2004). Source.

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