| name | due-diligence |
| description | Transaction due diligence skill for M&A, investment, and business transactions. Use when the user needs assistance with due diligence checklists, diligence review, risk assessment, diligence reports, or data room organization. Triggers on keywords like "due diligence", "diligence", "data room", "DD checklist", "diligence findings", "risk assessment", "transaction review", "investment review". |
Due Diligence
This skill provides expert guidance for conducting comprehensive due diligence in business transactions.
Core Capabilities
1. Diligence Planning
- Scope definition
- Checklist development
- Team coordination
- Timeline management
2. Document Review
- Systematic analysis
- Issue identification
- Risk categorization
- Finding documentation
3. Risk Assessment
- Material findings
- Deal impact analysis
- Mitigation strategies
- Remediation requirements
4. Reporting
- Executive summaries
- Detailed findings
- Risk matrices
- Recommendation memos
Due Diligence Process
Diligence Workflow
┌─────────────────────────────────────────────────────────────────┐
│ DUE DILIGENCE PROCESS │
├─────────────────────────────────────────────────────────────────┤
│ │
│ Scoping → Information → Review → Analysis → Reporting │
│ Request │
│ │
│ ↓ ↓ ↓ ↓ ↓ │
│ │
│ - Define - Send DDL - Document - Risk - Executive │
│ scope - Set up review assessment summary │
│ - Assign data room - Expert - Issue - Detailed │
│ teams - Track consult tracking findings │
│ - Create responses - Follow-up - Mitigation - Risk │
│ timeline questions strategies matrix │
│ │
└─────────────────────────────────────────────────────────────────┘
Team Structure
| Team | Focus Areas |
|---|
| Legal | Corporate, contracts, litigation, IP, employment |
| Financial | Financials, accounting, tax, working capital |
| Business | Operations, customers, market, strategy |
| Technical | Technology, products, cybersecurity |
| Environmental | Environmental compliance, liabilities |
| HR | Employee matters, benefits, culture |
Diligence Request Categories
Corporate/Organizational
1. FORMATION DOCUMENTS
□ Certificate/Articles of Incorporation
□ Bylaws/Operating Agreement
□ Amendments
□ Good standing certificates
2. CAPITALIZATION
□ Cap table (fully diluted)
□ Stock ledger
□ Option/warrant agreements
□ Convertible instruments
3. GOVERNANCE
□ Board minutes (3-5 years)
□ Shareholder minutes
□ Written consents
□ Committee minutes
4. EQUITY AGREEMENTS
□ Shareholder agreements
□ Voting agreements
□ Registration rights
□ ROFR agreements
Contracts & Commercial
5. CUSTOMER CONTRACTS
□ Top 20 customers by revenue
□ Standard forms
□ Customer concentration analysis
□ Pricing arrangements
6. SUPPLIER CONTRACTS
□ Top 20 suppliers
□ Single-source suppliers
□ Key terms and pricing
7. STRATEGIC AGREEMENTS
□ Joint ventures
□ Partnerships
□ Distribution agreements
□ License agreements
8. REAL ESTATE
□ Leases
□ Owned property
□ Environmental assessments
Financial & Tax
9. FINANCIAL STATEMENTS
□ Audited (3 years)
□ Interim statements
□ Management accounts
□ Audit letters
10. DEBT & FINANCING
□ Credit agreements
□ Loan documents
□ Security agreements
□ Compliance certificates
11. TAX
□ Tax returns (3-5 years)
□ Tax provisions
□ IRS correspondence
□ Transfer pricing
Employment & Benefits
12. EMPLOYMENT
□ Employee census
□ Executive agreements
□ Offer letter forms
□ Handbook/policies
13. COMPENSATION
□ Compensation data
□ Bonus plans
□ Equity plans
□ Commission structures
14. BENEFITS
□ Benefit plan documents
□ 401(k) plans
□ Insurance policies
□ COBRA compliance
Intellectual Property
15. IP PORTFOLIO
□ Patent list and status
□ Trademark registrations
□ Copyright registrations
□ Domain names
16. IP AGREEMENTS
□ License agreements (in/out)
□ Assignment agreements
□ Development agreements
□ Open source usage
Litigation & Regulatory
17. LITIGATION
□ Pending matters
□ Threatened claims
□ Settlement agreements
□ Insurance coverage
18. REGULATORY
□ Permits and licenses
□ Government correspondence
□ Compliance certifications
□ Investigation history
Data Room Organization
Standard Folder Structure
📁 1. Corporate
📁 1.1 Formation Documents
📁 1.2 Good Standing
📁 1.3 Capitalization
📁 1.4 Board Minutes
📁 1.5 Shareholder Minutes
📁 1.6 Equity Agreements
📁 2. Financial
📁 2.1 Audited Financials
📁 2.2 Interim Financials
📁 2.3 Budget & Projections
📁 2.4 Debt Documents
📁 3. Tax
📁 3.1 Tax Returns
📁 3.2 Tax Provisions
📁 3.3 Correspondence
📁 4. Material Contracts
📁 4.1 Customer Contracts
📁 4.2 Supplier Contracts
📁 4.3 Strategic Agreements
📁 4.4 Real Estate
📁 5. Intellectual Property
📁 5.1 Patents
📁 5.2 Trademarks
📁 5.3 Licenses
📁 5.4 Software
📁 6. Employment
📁 6.1 Agreements
📁 6.2 Compensation
📁 6.3 Benefits
📁 6.4 Policies
📁 7. Litigation
📁 7.1 Pending
📁 7.2 Threatened
📁 7.3 Settled
📁 8. Regulatory
📁 8.1 Permits
📁 8.2 Compliance
📁 8.3 Environmental
📁 9. Insurance
📁 10. IT/Technology
Data Room Best Practices
- Consistent naming conventions
- Version control
- Index with descriptions
- Access logging
- Watermarking (if needed)
- Q&A tracking
Risk Assessment Framework
Risk Categories
| Category | Impact | Examples |
|---|
| Critical | Deal breaker | Fraud, undisclosed litigation, title defects |
| High | Price adjustment | Material contract issues, key employee departure |
| Medium | Post-close item | Compliance gaps, documentation deficiencies |
| Low | Note for file | Minor administrative issues |
Risk Matrix Template
| # | Issue | Category | Risk Level | Deal Impact | Mitigation |
|---|-------|----------|------------|-------------|------------|
| 1 | [Finding] | Corporate | Critical | [Impact] | [Mitigation] |
| 2 | [Finding] | Contracts | High | [Impact] | [Mitigation] |
| 3 | [Finding] | Employment | Medium | [Impact] | [Mitigation] |
Common Red Flags
Corporate
- Missing or incomplete records
- Unauthorized equity issuances
- Undocumented related party transactions
- Governance violations
Contracts
- Change of control triggers
- Assignment restrictions
- Unusual termination rights
- Missing key contracts
Financial
- Unexplained adjustments
- Related party transactions
- Off-balance sheet liabilities
- Revenue recognition issues
Employment
- Key person dependency
- Non-compete enforceability
- Misclassification issues
- ERISA violations
IP
- Ownership questions
- License restrictions
- Open source contamination
- Infringement claims
Litigation
- Undisclosed claims
- Insurance coverage gaps
- Regulatory investigations
- Pattern of disputes
Due Diligence Report
Executive Summary Template
EXECUTIVE SUMMARY
TRANSACTION OVERVIEW
- Target: [Company]
- Deal Structure: [Stock/Asset Purchase]
- Purchase Price: $[Amount]
- Closing Date: [Anticipated]
DILIGENCE SCOPE
[Description of scope and limitations]
KEY FINDINGS SUMMARY
1. [Critical/High Risk Issue #1]
2. [Critical/High Risk Issue #2]
3. [Material Issue #3]
DEAL IMPACT
[Overall assessment and recommendations]
RECOMMENDED ACTIONS
1. [Pre-closing requirement]
2. [Purchase agreement protection]
3. [Post-closing item]
Detailed Findings Format
FINDING: [Title]
Category: [Corporate/Contracts/IP/Employment/Litigation/Tax/Other]
Risk Level: [Critical/High/Medium/Low]
Description:
[Detailed description of finding]
Documents Reviewed:
- [Document 1]
- [Document 2]
Analysis:
[Legal/business analysis of the issue]
Deal Impact:
[How this affects the transaction]
Recommended Mitigation:
[Suggested resolution]
Questions for Seller:
1. [Question]
2. [Question]
Diligence Timeline
Typical Timeline (Acquisition)
| Phase | Duration | Activities |
|---|
| Week 1 | Setup | Send DDL, organize team, data room access |
| Week 2-3 | Initial Review | Review priority documents, identify issues |
| Week 4 | Deep Dive | Follow-up questions, expert consultations |
| Week 5 | Analysis | Risk assessment, findings compilation |
| Week 6 | Reporting | Draft report, team review, deliver |
Milestone Checklist
Integration with Other Skills
- corporate-ma: M&A transaction due diligence
- contract-lifecycle: Contract analysis
- intellectual-property: IP due diligence
- employment-labor: Employment matters review
- environmental-law: Environmental due diligence
Reference Files
For detailed guidance:
references/checklist-templates.md - Due diligence request listsreferences/report-templates.md - Report format examplesreferences/risk-matrices.md - Risk assessment frameworks
