Acquisition DeskBusiness acquisition due diligence checklist.
Use this checklist to organize the financial, legal, operational, customer, employee, technology, and closing questions that can determine whether a small-business acquisition is what it appears to be.
Due diligence is the process of verifying the seller's claims, understanding what is being acquired, and identifying risks that could change the price, financing, structure, transition plan, or decision to proceed. A useful diligence process tracks not only what was requested, but what was received, what was reconciled, and what remains unresolved.
Last reviewed: August 2026
Requirements and risks vary by business, industry, location, financing structure, and transaction. Confirm current requirements with qualified legal, tax, lending, insurance, environmental, employment, cybersecurity, and industry advisers as applicable.
Collecting documents is not the same as completing due diligence.
A complete data room can still contain incomplete answers. A rigorous process involves four distinct steps for every major claim or assumption:
Request
Ask for the document, data, explanation, or access.
Reconcile
Compare the information with bank activity, tax records, contracts, systems, operating data, or other independent evidence.
Investigate
Follow inconsistencies, missing information, unusual trends, and unsupported assumptions.
Decide
Determine whether the finding changes valuation, financing, deal structure, representations, indemnification, transition planning, or the decision to proceed.
Request the right level of information at the right stage.
Timing depends on the transaction and professional advice. Do not encourage buyers to request highly sensitive employee or customer-level information before an appropriate NDA and process.
Initial screening
Determine whether the opportunity deserves more time before drafting an LOI.
- • Recent financial summary
- • Asking price and proposed structure
- • High-level customer concentration
- • Business model
- • Owner role
- • Staffing overview
- • Major assets
- • Lease overview
- • Reason for sale
After an LOI
Detailed verification expands after an accepted LOI, exclusivity, and appropriate confidentiality protections.
- • Detailed financial records
- • Tax returns
- • Bank and merchant statements
- • Customer and vendor data
- • Contracts
- • Employee and payroll information
- • Legal and compliance records
- • Asset schedules
- • Technology and cybersecurity information
Before closing
Confirm that assumptions and conditions remain true immediately before closing.
- • Final working-capital calculation
- • Inventory count
- • Outstanding debt and liens
- • Required consents
- • Licenses and permits
- • Employee and customer developments
- • Closing deliverables
- • Insurance
- • Funds flow
- • Transition access
Due diligence checklist
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1Financial statements and earnings quality
A document should not be treated as verified merely because it was provided by the seller. Significant amounts and trends should be reconciled to appropriate supporting evidence.
2Tax records and obligations
3Customers, revenue quality, and demand
4Vendors, suppliers, and purchasing
5Employees, payroll, benefits, and key-person risk
6Operations, systems, and owner involvement
7Legal structure, contracts, licenses, and compliance
The buyer's attorney should determine which liabilities, contracts, permits, licenses, and obligations may transfer or remain with the acquired entity under the proposed transaction structure.
8Assets, inventory, facilities, and environmental matters
9Technology, intellectual property, data, and cybersecurity
10Insurance coverage and claims
11Financing, purchase price, and deal structure
12Closing readiness and transition
Diligence should remain active through closing. A material change between the initial review and closing may require additional investigation or a change to the transaction.
Red flags that deserve immediate follow-up
A red flag does not always mean the buyer should walk away. It means the issue should be verified, quantified, documented, and incorporated into the decision or transaction structure.
seller-provided financials do not reconcile to supporting records;
material add-backs lack documentation;
recent growth or margin improvement cannot be explained;
one customer, vendor, employee, license, or owner relationship is essential;
tax notices, liens, overdue payroll taxes, or sales-tax concerns exist;
accounts receivable or inventory appear overstated;
important contracts cannot be assigned;
permits or licenses are expired or tied to the seller personally;
owner involvement is substantially greater than represented;
key employees are unaware, uncommitted, or planning to leave;
deferred maintenance or near-term capital expenditures are understated;
cybersecurity incidents or access weaknesses are unresolved;
seller delays, restricts, or changes access to core information;
transaction assumptions change repeatedly without documentation;
information supplied by different sources conflicts.
Prioritized starter request list
When a seller asks "what do you need to see?", these items generally provide the best starting point for analyzing a small business before an LOI is signed.
- 1Historical tax returns.
- 2Annual and monthly financial statements.
- 3Year-to-date financials.
- 4General ledger and trial balance.
- 5Bank and merchant statements.
- 6Accounts-receivable and accounts-payable aging.
- 7Debt schedule.
- 8Payroll summary and employee roster.
- 9Customer revenue concentration.
- 10Major customer and vendor contracts.
- 11Lease and major equipment agreements.
- 12Fixed-asset and inventory schedules.
- 13Licenses and permits.
- 14Litigation, claims, liens, and tax notices.
- 15Owner-role and transition description.
- 16Technology, software, access, backup, and incident overview.
Acquisition Desk
Keep diligence organized and moving forward.
Acquisition Desk helps buyers keep the listing, financial analysis, risk review, broker questions, documents, deal updates, and acquisition materials connected to the same deal record.
- Requested item, responsible party, and dates requested and received.
- Review status, findings, evidence, follow-up questions, and risk level.
- Impact on valuation, financing, legal structure, operations, and closing.
- Resolution and any unresolved closing condition.
A professional advisory team
Each professional should evaluate matters within their own area of expertise. The appropriate team depends on the business, industry, location, financing, structure, and transaction.
Acquisition attorney
CPA or tax adviser
Quality-of-earnings or financial diligence provider
Acquisition lender
Insurance adviser
Employment counsel
Environmental consultant where applicable
Cybersecurity or technology specialist where applicable
Industry specialist
Real-estate adviser where applicable
Frequently asked questions about business acquisition due diligence
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