mergers-acquisitions-due-diligence-method

# Mergers and Acquisitions Due Diligence Method ## Freeze matter authority and transaction perimeter Record matter ID, buyer/seller and adviser roles, transaction form as supplied, entities/assets/businesses in and out of perimeter, reference date, review period, currency, accounting basis, VDR snapshot, request-list version, approved materiality rules, confidentiality/privilege, source restrictions and named specialist reviewers. Stable IDs must distinguish legal entity, business unit, document, request, issue, financial adjustment, customer, system and person dependency. State `decision_not_made`: no valuation, fairness opinion, quality-of-earnings report, tax/legal/regulatory conclusion, transaction structure, bid, negotiation position, purchase-price adjustment, filing, contact, signing, closing condition, integration approval or go/no-go recommendation. ## Inventory the VDR and prove review coverage Map each VDR document to native identifier/path, title, custodian or provider, version, date, upload/removal state, confidentiality, page/Bates or stable pinpoint, checksum/native identity when supplied, request-list category and review status. Preserve duplicate, superseded, missing, inaccessible, withdrawn and cutoff-late items. Reconcile category totals to the fixed snapshot; do not represent a dynamic data room as complete. Apply only operator-supplied materiality definitions and thresholds, with source/version/date and applicable category. When metadata is insufficient to apply a rule, record unclassified and request evidence. Materiality decides review routing, not legal or transaction significance. A zero-document category is a gap, not proof that no issue exists. ## Reconcile financial quality and working capital Separate reported, adjusted, pro forma, forecast and management-estimate values. For every value retain entity, account/metric definition, period, currency, unit, accounting basis, source locator, formula, sign convention, transformation and reconciliation. Trace revenue, margin, recurring/nonrecurring assertions, customer credits, reserves, debt-like/cash-like items, working-capital components, capital expenditure and off-balance-sheet assertions only as supplied evidence. For each proposed adjustment show management rationale, direct source, counterevidence, recurrence test, affected periods, tax/accounting-review need and uncertainty. Never invent normalized earnings, net-debt classification, target working capital, synergy, forecast, discount rate, multiple or purchase-price effect. Differences remain open until a qualified accounting/finance owner disposes them. ## Test commercial, customer, market and operating evidence Define customer, product, geography, channel, cohort, contract and metric populations before concentration or retention calculations. Reconcile customer-level data to financial totals and preserve unmatched amounts. Distinguish bookings, billings, revenue, pipeline and management targets; logo and revenue retention; gross and net measures; contracted and inferred demand. Bind market-size, share, competitor and growth claims to dated sources and definitions. Record methodology, denominator, geography and period. Treat synergy and integration benefits as owner-supplied hypotheses with dependencies, cost, timing and counterevidence, never as achieved value. Examine operational capacity, supplier dependency, service levels, backlog and key process dependencies without recommending an operating change. ## Extract legal, regulatory, technology and people issues Record source text or faithful fact summary with exact document/page/Bates location. Potential topics include entity authority, change of control, consent, rights/obligations, litigation, permits, regulatory correspondence, intellectual-property ownership, open-source evidence, privacy/security obligations, architecture and technical debt, resilience, employee/contractor terms, incentives and key-person dependency. These are issue flags, not legal, technical-safety, employment or compliance conclusions. When a cited law, rule, filing or approval is not available from an authorized primary source, label it unretrieved and route to counsel. Never characterize it from memory. Protect privilege and purpose limitations; do not move matter content outside the authorized review circle. ## Form findings and cross-domain interactions Each issue needs stable ID, factual condition, source, materiality-rule source if applied, affected perimeter, potential mechanism, counterevidence, unknowns, requested document or analysis, specialist owner and possible transaction stage as supplied. Separate diligence fact, analyst inference, management assertion, adviser view and decision. Join cross-domain interactions such as customer concentration versus revenue quality, IP ownership versus product revenue, workforce dependency versus operating plan, cybersecurity obligation versus technical controls, or regulatory approval versus timing. Preserve incompatible dates, populations and currencies. Do not net unlike risks into a score or label the transaction acceptable. ## Stop and qualified review Stop on absent matter/VDR authority; unclear perimeter, privilege, materiality or cutoff; unauthorized remote access; unverifiable source; mixed entity, currency, period or accounting basis; missing denominator; pressure to suppress a gap; or a request to contact parties, use live VDR tools, value, negotiate, file, sign or decide. Use the five assets under `assets/`. Read `references/UPSTREAM.md` and `references/ADAPTATION.md` before applying retained concepts. Route financial issues to qualified accounting/finance advisers, legal/regulatory/tax issues to applicable counsel, technology/security issues to qualified specialists, people issues to HR/employment counsel, and deal decisions to the sponsor or transaction committee. Keep `outcome_unknown` until those owners decide.