An M&A Due Diligence Checklist for the Greatest Upside at the Point of Sale

| February 2023

The M&A market is alive and well in 2023, despite widespread economic fears and uncertainties.

According to PwC’s Global M&A Industry Trends: 2023 Outlook, “current market conditions suggest that we are in a sweet spot for M&A, provided that companies have well-thought-out strategies and the financial wherewithal…to make transformational deals.”

This is all the more reason for sellers to make sure their businesses are in the best position to sell for a high price, and for buyers to ensure potential acquisition targets are a perfect match for their needs and goals. By using a proven M&A due diligence checklist ahead of making a deal, you’ll increase your chances of success.

A checklist will help guarantee the greatest upside at the point of sale — and a business broker with experience in your particular vertical is a great partner to have as you check off each item.

First, however, it’s good to grasp why a detailed due diligence M&A process matters.

The Importance Of A Solid M&A Due Diligence Process

To ensure your M&A deal is a net positive both financially and strategically, it's vital to get every detail right as you head into negotiations. Here are the most important areas of concern ahead of any potential deal:

Ensuring Company Finances Are Healthy

Any business being acquired should be free of outsized debts, tax complications, and bad third-party contracts.

If you’re a seller, rooting out these issues will make you a lot more attractive to a serious buyer. If you’re a buyer, you’ll want your target to be free of these issues. Acquiring a business with bad finances can quickly deplete cash after the deal is done, potentially hurting you more than any short-term upside can make up for.

Avoiding Legal Complications

Legal issues — from intellectual property violations and third-party contract disputes to wrongful employee terminations and local zoning violations — often plague smaller businesses.

These problems equate to costly liabilities and reputational damage for a buyer. Due diligence helps root out such red flags ahead of an M&A deal.

Determining The Soundness Of Day-To-Day Operations

A savvy buyer will want to avoid the burden of restructuring the company they’re acquiring, especially if they have an existing business to maintain.

Both sellers and buyers must assess the well-being of the business that’s up for sale. Documentation of daily operations and employee satisfaction, along with efficient systems for customer service, are important considerations.

It also helps if the target company employs software and other technologies to automate tasks, reduce labor, and lower costs.

Creating A Foundation For Trust And Good Communication

Good deals are built based on strong communication. The M&A process should establish a good rapport between business owners or executive teams from the get-go.

Even in the early stages, meetings should set the table for easy exchange of ideas or concerns from both sides. This kind of start will help build trust and streamline problem-solving later in the process.

Raincatcher’s M&A Due Diligence Checklist

Once both sides of the deal are set and the seller has signed off on the buyer’s letter of intent (LOI), a buyer should run through the following checklist to ensure the M&A process runs smoothly.

Note: This can also be used as an M&A checklist for sellers. A seller should ensure their business is on target with each of the following items and should be prepared to furnish all relevant documentation.


  • Make sure accounts receivable and accounts payable are valid and current.

  • Make sure balance sheets, P&L statements, and cash flow statements are fully accurate within several periods: year-to-date (YTD), the last 12 months (LTM), and the past 3 years.

  • Secure financial projections and pro forma statements, plus all rationale behind the claims made.

  • Secure bank statements and reconciliations for the prior 3 years.

  • Document every adjustment to the target business’s EBITDA (earnings before interest, taxes, depreciation, and amortization).

  • Gather federal and state tax returns for the prior 3 years and documentation of any tax audits.

  • Evaluate all ongoing and expected debts for the next 3 years.

  • Gather documentation of all investment policies and activities.

  • Assess any seasonal or regularly-recurring changes in business income or overhead.

  • Acquire all agreements for loans and credit lines, including interest rates, repayment terms, and other details.


  • Gather any documentation of standard operating procedures (SOPs) that guide daily business activities.

  • Acquire any employee performance evaluations.

  • Gather all agreements made with outside contractors and consultants, including scope of work, duration of service, terms of payment, access to intellectual property, and indemnification terms.

  • Obtain written guidelines around customer support and customer relationship management.

  • Gain any documentation of staff and customer health and safety policies.

  • Obtain a full listing of product inventory, along with documented inventory management systems and practices.

  • Obtain documentation of any manufacturing, quality control, and testing procedures.

  • Evaluate all processes around product design, research, and development.

  • Examine the health of the supply chain from end to end, including supply and logistics relationships.

  • Examine all intellectual property (IP) including patents, copyrights, and trade secrets held by the target business.

  • Assess all documentation of business insurance and other risk management policies.


  • Gather documentation of all resolved, outstanding, and pending legal disputes.

  • Secure copies of all license, compliance, and regulatory approval documents.

  • Evaluate all contracts with third parties, with all termination and transfer clauses clearly spelled out.

  • Gather documentation of background checks on employees, third parties, and other stakeholders.

  • Gain copies of any letters sent to or from the government and regulatory committees.

  • Pull together documentation of all rights and legal use policies surrounding the target business (IP).

Marketing And Sales

  • Assess the impact of all offline marketing materials and activities, such as brochures, catalogs, billboards, promotional merchandise, and local events.

  • Assess the impact of online marketing initiatives and channels, such as a website, social media advertising, PPC advertising, SEO, and email marketing.

  • Gather documentation of sales processes, such as lead generation and lead qualification methods.

  • Examine customer retention strategies.

  • Evaluate product pricing, and any documented rationale behind set prices or changes in pricing.

  • Assess the sales team and breadth of experience represented.

  • Assess any market and customer research, along with details such as demographics, survey responses, and best-performing methods of customer engagement.

  • Gather documentation of all relevant key performance indicators related to sales and marketing, such as monthly and annual recurring revenue (MRR and ARR), online traffic, conversion rates, cost per lead (CPL), ROI per marketing channel, customer lifetime value (CLV), customer acquisition cost (CAC), and churn rate.

IT And Cybersecurity

  • Evaluate the cost and efficiency of the business’s website, computer hardware and software, and telecommunication tools.

  • Gain documentation of any data breaches, along with steps taken to resolve them or minimize their impact on the business.

  • Gather all IT audit records and compliance reports.

  • Examine all online security activities, such as firewall and antivirus settings.

  • Gather all customer data security and privacy policies.

  • Gather documentation of all policies around the use of mobile devices and remote work.

Steps To Take After Due Diligence

After you’ve checked off all the relevant due diligence items, you’ll still want to take a few steps to make sure the deal is a successful one, as part of an M&A closing checklist:

  • Ensure a seamless transition of personnel. The buyer might want to take on some standout employees and offer them attractive terms to stay on the job. Both the buyer and seller can assist in making this happen smoothly.

  • Verify alignment on vision and mission. A lack of agreement on core principles can affect how the deal plays out in the aftermath of signing, even if every due diligence item checks out.

  • For buyers, establish a detailed plan to continue monitoring the target business’s KPIs. Keeping a close eye on the target business’s performance, without compromising current activities, will only help ensure the deal lives up to its promises.

In the closing phase, keeping these remaining principles in mind can help your M&A deal become the success story it’s meant to be. To make it even more sure, work with an experienced business broker who can guide you along every step.

Work With Raincatcher

The business brokers at Raincatcher are second-to-none in terms of experience with mergers and acquisitions of all types.

By working with our professionals, you’ll guarantee a smoother, more thorough due diligence M&A process that ensures alignment with your goals, and will free you up to focus on your current day-to-day activities.

If you’re considering the worth of a potential M&A deal, and you want to complete your due diligence with confidence, contact Raincatcher today for a consultation!

Business Brokerage
Business Brokerage

Is Now the Right Time to Sell a Business?

If you’re thinking about selling your company during these unprecedented times, you’re not alone.
View Posts

Raincatcher Represents Winter Park & Steamboat Lodging Companies On Their Successful Sale to Sunset Management Company

Winter Park Lodging Company, a family-owned vacation rental company in Colorado, has been acquired by Sunset Management Company. Raincatcher exclusively represented the Steamboat Springs-based company during the sale process.
View Posts

Top Ten Tax Considerations for Business Sellers

Be empowered as a business owner and know the 10 Most Important Tax considerations for business sellers.
View Posts