due-diligence-request-list

Due Diligence Request List

This skill builds a structured, prioritized financial due diligence information request list (IRL / DDQ) that a deal team can issue directly to a target or vendor. It tailors the request to the deal type (buy-side, sell-side/vendor, refinancing), the target's industry, and its size, then organizes items into a tracker with owners, status, and priority so nothing falls through the cracks during a time-boxed diligence period. It is for corporate finance and transaction advisory professionals, FP&A teams supporting deals, and anyone scoping a quality-of-earnings (QofE) or financial due diligence engagement.

When to use this

• A buy-side client has signed an LOI/heads of terms and needs to issue a first-round information request to the target.
• A sell-side client is preparing vendor due diligence (VDD) and wants to pre-empt buyer requests by assembling a data room index.
• You are scoping a quality-of-earnings analysis and need the underlying data (trial balances, GLs, revenue cuts) requested up front.
• You need to convert a generic checklist into a deal-specific tracker with priorities, owners, and status columns.
• A refinancing or recapitalization requires a net-debt and covenant-focused information pull.

Inputs

Provide as much of the following as you have; the skill fills sensible defaults and flags assumptions:

• Deal parameters: deal type (buy-side / sell-side / refinancing), target name (use a placeholder if confidential), industry/sector, approximate revenue and EBITDA, number of legal entities, geographies, fiscal year-end, and the diligence period length.
• Scope: which workstreams are in scope (financials, QofE, working capital, net debt, tax, commercial, HR/payroll, IT, ESG). Default is all financial workstreams.
• Optional: an existing draft list or prior-deal IRL to merge and de-duplicate.

A bundled sample, samples/deal_parameters.csv, illustrates the minimal parameter set for a fictional buy-side deal (Aurora Components Ltd). Reference it when no parameters are supplied.

How to do it

Follow this methodology. Cite the relevant standard or convention so the request is defensible and the recipient understands intent.

1. Confirm scope and materiality. Set a working materiality (commonly 0.5%-1% of revenue or ~5% of EBITDA) so granular requests (e.g., GL line detail) are scaled to the deal. Smaller deals get a leaner list; complex multi-entity targets get entity-level cuts.

2. Request a consistent reporting baseline. Ask for audited statutory financials for the last 3 full years plus the latest interim (LTM), management accounts monthly for 36 months, and the trial balance and detailed GL for the same periods. Note the applicable framework (IFRS, IFRS for SMEs, or local/US GAAP) so adjustments are interpreted correctly. For groups, request the consolidation file and intercompany eliminations.

3. Build the Quality of Earnings (QofE) pull. The objective is a normalized, run-rate EBITDA. Request the items needed to test and quantify adjustments:

   • One-off / non-recurring items (restructuring, legal settlements, M&A costs, COVID-era support).
   • Owner/related-party costs (above- or below-market salaries, management fees, related-party rent) for normalization to arm's length.
   • Accounting policy effects: revenue recognition (IFRS 15 five-step / ASC 606), capitalization vs. expensing, provisioning, and any policy changes across the period.
   • Lease impact: a schedule reconciling pre- and post-IFRS 16 EBITDA (right-of-use assets, lease liabilities, depreciation and interest split) so EBITDA is comparable across periods and to peers.
   • Revenue quality: monthly revenue by product/service, customer, and geography; top-20 customer concentration; recurring vs. one-off revenue; churn and retention; backlog/order book; price vs. volume bridges.
   • Margin bridges: gross and EBITDA margin walk by year explaining the movement.

4. Scope the Working Capital (NWC) analysis. This drives the completion mechanism (locked box vs. completion accounts). Request:

   • Monthly balance sheet for 36 months to compute a normalized net working capital level and the seasonal range (the "peg").
   • Aged debtors and creditors, DSO/DPO/DIO trends, inventory ageing and provisioning policy, and accrual/prepayment detail.
   • Identification of items that are working-capital vs. debt-like (see step 5) to avoid double-counting.

5. Define Net Debt and debt-like items. Equity value = enterprise value - net debt +/- working capital adjustment. Request the data to build a complete net-debt bridge:

   • All borrowings, leases (finance and operating under IFRS 16), overdrafts, and accrued interest.
   • Debt-like items: unfunded pension obligations, deferred/contingent consideration, unpaid tax, dividends declared but unpaid, capex commitments and overdue payables, restructuring provisions, customer prepayments, and onerous contracts.
   • Cash-like items and restricted/trapped cash; off-balance-sheet exposures, guarantees, and factoring/securitization arrangements (these can hide leverage).

6. Scope Tax. Request returns and assessments (corporate income tax, VAT/GST, payroll/employment taxes) for open years, transfer pricing documentation and intercompany agreements (OECD Transfer Pricing Guidelines), tax losses and their utilization restrictions, any rulings/audits/disputes, and the VAT treatment of material transaction streams (EU VAT Directive 2006/112/EC where relevant). Frame all tax items as data requests, not conclusions.

7. Scope Commercial and HR. Commercial: customer/supplier contracts (term, change-of-control, exclusivity), pipeline, pricing, and KPI dashboards. HR/payroll: headcount by function, payroll reconciliation to the GL, bonus/commission schemes, key-person dependencies, and any defined-benefit pension exposure. Sensitive personal data should be requested in aggregate/anonymized form.

8. Sequence by priority. Tag every item P1/P2/P3:

   • P1 (day 1, deal-critical): audited financials, trial balances, monthly management accounts, debt schedule, tax returns.
   • P2 (week 1, analysis-enabling): revenue cuts, customer concentration, working-capital detail, normalization support.
   • P3 (as needed / confirmatory): contracts, HR detail, ancillary schedules. Put P1 items at the top so the data room is populated in the right order.

9. Assemble the tracker. Convert the list into a living tracker with owner, due date, status, and a notes/follow-up column so the deal team can manage cadence (typically weekly status calls).

Output

Produce a due diligence request tracker as a Markdown table (and, if asked, describe an equivalent .xlsx with one tab per workstream). Group rows by workstream and include these columns:

• Ref (e.g., FIN-01, QOE-03, NWC-02, ND-04, TAX-01, COM-02, HR-01)
• Workstream (Financials, QofE, Working Capital, Net Debt, Tax, Commercial, HR)
• Item requested (specific and self-explanatory)
• Format / period (e.g., "Excel, monthly, FY23-LTM")
• Priority (P1/P2/P3)
• Rationale (one line: why it matters to value or risk)
• Owner (deal-team responsible)
• Status (Requested / Received / In review / Closed / N/A)
• Notes / follow-up

Lead with a short scope header (deal type, periods, framework, materiality assumption) and end with an open-items count by priority.

Quality checks

• Every P1 item maps to a defined analysis (QofE, NWC peg, or net-debt bridge); no orphan requests.
• Working-capital and debt-like items are mutually exclusive - no item is counted in both NWC and net debt.
• An IFRS 16 lease reconciliation is requested whenever EBITDA is compared across periods or to peers.
• Periods are consistent (e.g., FY-3 to LTM) and the reporting framework is stated.
• Requests are scaled to materiality - avoid GL-line detail on an immaterial entity.
• Tax, commercial, and HR items request data, never conclusions; personal data is aggregated/anonymized.
• The list is de-duplicated against any prior draft, and confidential target identifiers are placeholders until access is confirmed.

Worked example

Using samples/deal_parameters.csv (buy-side, Aurora Components Ltd, EUR 48m revenue, EUR 6.2m EBITDA, 2 entities, manufacturing, Dec year-end, 6-week diligence):

• Scope header notes IFRS for SMEs, materiality ~EUR 310k (0.65% of revenue).
• P1 rows: FIN-01 audited accounts FY23-FY25; FIN-02 trial balances; FIN-03 monthly management accounts 36 months; ND-01 debt schedule with accrued interest and leases; TAX-01 corporate tax and VAT returns for open years.
• P2 rows: QOE-01 normalization schedule (owner salary, one-off legal costs); QOE-02 IFRS 16 lease reconciliation; NWC-01 monthly balance sheet 36 months for the peg; QOE-03 revenue by customer/product with top-20 concentration (manufacturing concentration risk).
• P3 rows: COM-01 customer contracts with change-of-control terms; HR-01 headcount and payroll reconciliation.

The output is the tracker above, sorted P1 to P3, ready to issue to the target with owners and a weekly status cadence.

Disclaimer

Disclaimer: This skill is a drafting and analysis aid, not professional advice. It does not provide accounting, audit, tax, investment, or legal advice. All output must be reviewed and approved by a qualified professional before use or reliance.

Tax-related items in any generated request list are data requests and preliminary analysis only - verify any tax treatment or position with a qualified tax advisor; never treat skill output as a definitive tax position.

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