Below is an example of a due diligence checklist for mergers & acquisitions, capital raising, and other transactions. The due diligence checklist includes over 25 items that range from financial to legal to operations items that should be verified before completing the transactions.
Example – Due Diligence Checklist Items
What is the bank’s current and historical involvement with the corporate issuer and its management?
Has the lead underwriter/agent reviewed the issuer’s business and operations with the issuer’s management?
Does management have a written business plan, corporate strategy, and/or internal budget/forecast? If so, were such materials reviewed by the lead underwriter/agent in the context of this transaction? {optional for bought deals}
What are the key factors for issuer/ industry success?
Has the lead underwriter/agent reviewed the issuer’s current and historical financials? Were any material issues identified that have not been disclosed adequately?
Has the lead underwriter compared the issuer’s actual financial performance against the issuer’s plan? {optional for bought deals}
Has the lead underwriter/agent been provided with any forecast financial information?
Has the lead underwriter/agent conducted any site visits? {optional for bought deals}
Has the lead underwriter/agent consulted with any experts (e.g., Independent engineers, environmental consultants, tax accountants, forensic investigators, etc.) In connection with the offering?
Has the lead underwriter completed any customer/supplier checks to determine relationships/ reputation? {optional for bought deals}
How well does the bank know the issuer’s management team? Does the bank have any reason to be concerned about the competence or integrity of the issuer’s management?
How much time has the bank spent with the issuer’s management in connection with the offering and/or any historical transactions? Has the issuer’s CEO/ CFO been involved in preparing the issuer’s public disclosure documents?
In the case of an issuer that is already a public company, is the lead underwriter aware of any concerns about the issuer’s disclosure history?
Has the issuer’s management and external advisors been fully cooperative with the underwriters and underwriters’ counsel during the due diligence process?
Has the bank equity research department been involved in the due diligence process? Does the bank equity research department cover the issuer’s securities? Is the bank equity research department familiar with the issuer’s business generally, as a result of covering some of its competitors or otherwise? {optional for bought deals}
Has the issuer’s independent auditor been involved in the due diligence process and/or participated in drafting any of the issuer’s public disclosure documents? Has the issuer instructed the auditor to deliver an auditor’s long-form comfort letter to the underwriters/placement agents in connection with the offering? Does the bank have any reason to be concerned about the auditor’s competence?
Has the lead underwriter/placement agent reviewed the auditors’ management letters for the preceding three years?
Has the issuer changed any of its accounting policies in the preceding three years where such changes were material to the issuer’s financial statements? Has the issuer indicated any intention to change its current accounting policies during the next 12 months?
Has the lead underwriter/placement agent reviewed the issuer’s management information systems and technology infrastructure?
Who is acting as external legal counsel (name of firm and lawyers principally involved) for the underwriters/placement agents? Has external counsel completed a customary legal due diligence review of the issuer? Has the lead underwriter/placement agent indicated any dissatisfaction with the degree of counsel’s participation in the prospectus process, the extent of counsel’s access to the issuer’s management, litigation records, material contracts, and minute books or the results of counsel’s due diligence investigation? Does the bank have any reason to be concerned about such counsel’s competence?
Who is acting as external legal counsel (name of firm and lawyers principally involved)’ for the issuer? What is the counsel’s history with the issuer? Has the counsel been involved in the due diligence process and in drafting the offering memorandum or prospectus used to complete the offering? Does the bank have any reason to be concerned about the counsel’s competence?
Who are the issuer’s directors? Does the bank have any reason to be concerned about the competence or integrity of the issuer’s management?
In the case of an initial public offering or a secondary offering by a major shareholder, has the major shareholder(s) been involved in the due diligence process and/or participated in drafting the offering memorandum or prospectus used to complete the offering? Is the major shareholder providing any representations, warranties, or indemnities in connection with the offering? {optional for bought deals}
Has the lead underwriter/placement agent and/or external counsel reviewed the issuer’s material contracts to confirm that they are disclosed sufficiently and accurately?
Does the issuer’s success depend significantly on any proprietary intellectual property including relevant patents, trademarks, or websites? If so, has counsel to the underwriters/placement agents reviewed the adequacy of the issuer’s legal protections and any related risk disclosures?
Apart from the offering, what are the issuer’s other sources of material financing?
Does the issuer have any significant environmental issues, liability, or exposure?
Additional Resources
Thank you for reading this guide to CFI’s example of a due diligence checklist. To keep learning and advancing your career in corporate finance, these additional resources will help you on your way:
CFI is a global provider of financial modeling courses and of the FMVA Certification. CFI’s mission is to help all professionals improve their technical skills. If you are a student or looking for a career change, the CFI website has many free resources to help you jumpstart your Career in Finance. If you are seeking to improve your technical skills, check out some of our most popular courses. Below are some additional resources for you to further explore:
CFI is a global provider of financial modeling courses and of the FMVA Certification. CFI’s mission is to help all professionals improve their technical skills. If you are a student or looking for a career change, the CFI website has many free resources to help you jumpstart your Career in Finance. If you are seeking to improve your technical skills, check out some of our most popular courses. Below are some additional resources for you to further explore:
Below is a break down of subject weightings in the FMVA® financial analyst program. As you can see there is a heavy focus on financial modeling, finance, Excel, business valuation, budgeting/forecasting, PowerPoint presentations, accounting and business strategy.
A well rounded financial analyst possesses all of the above skills!
Additional Questions & Answers
CFI is the global institution behind the financial modeling and valuation analyst FMVA® Designation. CFI is on a mission to enable anyone to be a great financial analyst and have a great career path. In order to help you advance your career, CFI has compiled many resources to assist you along the path.
In order to become a great financial analyst, here are some more questions and answers for you to discover:
CFI is a global provider of financial modeling courses and of the FMVA Certification. CFI’s mission is to help all professionals improve their technical skills. If you are a student or looking for a career change, the CFI website has many free resources to help you jumpstart your Career in Finance. If you are seeking to improve your technical skills, check out some of our most popular courses. Below are some additional resources for you to further explore:
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