Due Diligence Checklist
Workflow
Step 1: Scope the Diligence
Ask the user for:
- Target company: Name, sector, business model
- Deal type: Platform acquisition, add-on, growth equity, recap, carve-out
- Deal size / complexity: Determines depth of diligence (CrowTech lower middle-market deals typically $25M–$250M EV)
- Key concerns: Any known issues to prioritize (customer/payor concentration, regulatory, reimbursement, environmental, etc.)
- Timeline: When is LOI / close targeted?
Step 2: Generate Workstream Checklists
Generate a checklist across all major workstreams, tailored to the sector:
Financial Due Diligence
- Quality of earnings (QoE) — revenue and EBITDA adjustments
- Working capital analysis — normalized vs. actual
- Debt and debt-like items
- Capital expenditure (maintenance vs. growth)
- Tax structure and exposure
- Audit history and accounting policies
- Pro forma adjustments (run-rate, synergies, same-store vs. de novo vs. M&A decomposition for multi-site platforms)
Commercial Due Diligence
- Market size and growth (TAM/SAM/SOM)
- Competitive positioning and market share
- Customer/payor analysis — concentration, retention, NPS; payor mix (Medicare / Medicaid / commercial / self-pay) and exposure to rate pressure
- Pricing power and contract structure; value-based care contracts (MSSP, ACO REACH, MA) vs. FFS
- Sales pipeline and backlog
- Go-to-market effectiveness; site-of-service dynamics (ASC vs. HOPD, home-based care)
Legal Due Diligence
- Corporate structure and org chart
- Material contracts (customer, supplier, partnership, payor)
- Litigation history and pending claims
- IP portfolio and protection
- Regulatory compliance (Stark/AKS, corporate practice of medicine, state CON laws where applicable)
- Employment agreements and non-competes
Operational Due Diligence
- Management team assessment
- Organizational structure and key person risk
- IT systems and infrastructure
- Supply chain and vendor dependencies
- Facilities and real estate
- Insurance coverage (including malpractice where applicable)
HR / People Due Diligence
- Org chart and headcount trends
- Compensation benchmarking; clinical labor wage inflation (RN / MA / physician) and turnover
- Benefits and pension obligations
- Key employee retention risk (physicians, clinical leadership)
- Culture assessment
- Union/labor agreements
IT / Technology Due Diligence (for tech-enabled businesses)
- Technology stack and architecture
- Technical debt assessment
- Cybersecurity posture
- Data privacy compliance (GDPR, CCPA, HIPAA, SOC2)
- Product roadmap and R&D spend; FDA pathway / De Novo / 510(k) status for clinical AI
- Scalability assessment
Environmental / ESG (where applicable)
- Environmental liabilities
- Regulatory compliance history
- ESG risks and opportunities
Step 3: Status Tracking
For each item, track:
| Item | Workstream | Priority | Status | Owner | Notes |
|---|
| QoE report | Financial | P0 | Pending | | |
| Payor/customer interviews | Commercial | P0 | In Progress | | 3 of 10 complete |
Status options: Not Started → Requested → Received → In Review → Complete → Red Flag
Step 4: Red Flag Summary
Maintain a running list of red flags discovered during diligence:
- What was found
- Which workstream
- Severity (deal-breaker / significant / manageable)
- Mitigant or path to resolution
- Impact on valuation or deal terms
Step 5: Output
- Excel workbook with tabs per workstream (default)
- Summary dashboard: % complete by workstream, outstanding items, red flags
- Weekly status update format for deal team
Sector-Specific Additions
Automatically add relevant items based on sector:
- Software/SaaS: ARR quality, cohort analysis, hosting costs, SOC2
- Healthcare services: Reimbursement mix and rate exposure, payor contracts, VBC / risk-bearing contract economics, CMS rulemaking exposure, Stark/AKS compliance, state CON laws, corporate practice of medicine structure, credentialing/licensure, clinical labor economics, same-store vs. de novo vs. M&A growth
- Healthcare AI / automation: HIPAA / SOC2, PHI handling, FDA pathway (De Novo, 510(k)), payor/provider reference customers, clinical validation evidence
- Industrial: Equipment condition, environmental remediation, safety record
- Financial services: Regulatory capital, compliance history, credit quality
- Consumer: Brand health, channel mix, seasonality, inventory management
Important Notes
- Prioritize P0 items that are gating to LOI or close
- Flag items where the seller is slow to respond — may indicate issues
- Cross-reference data room contents against the checklist to identify gaps
- Update the checklist as diligence progresses — it's a living document