Buyer checklist

Business Acquisition Due Diligence Checklist

A printable, evidence-led request list for testing earnings, transferability, liabilities, operating continuity, price, and closing readiness.

18 min readUpdated September 12, 2026

Short answer: Request enough evidence to reconcile the company’s earnings, confirm what legally and operationally transfers, find obligations outside the listing, quantify buyer-specific cash needs, and re-check material facts before closing. Receiving a document is not the same as verifying the claim it supports.

Build a tailored diligence plan

How to Use This Checklist

Use this list as a control framework, then tailor it to the transaction’s state, industry, structure, size, financing, and known risks. Begin with a focused first request. Expand when the evidence reveals concentration, inconsistencies, transfer restrictions, compliance exposure, or missing controls. Assign every item a status: requested, received, reviewed, verified, exception, unavailable, or not applicable.

For each material conclusion, preserve the source file, source owner, covered period, exact legal entity, retrieval date, reviewer, and limitation. Keep seller claims, public-record observations, calculations, estimates, and professional opinions distinct. Confidence should reflect evidence quality and agreement—not the tone of an AI summary.

1. Deal Identity and Transaction Scope

Begin by proving which legal entity owns the operations, assets, contracts, licenses, employees, and trade names the seller says are included. A familiar storefront name may not be the entity signing the agreement. Map every entity and owner before searching records or interpreting financial statements.

□ Exact legal name, formation state, entity number, status, ownership, and organizational documents
□ All DBAs, former names, subsidiaries, related entities, locations, and operating addresses
□ Proposed asset or equity structure and a schedule of included and excluded assets
□ Included cash, receivables, deposits, inventory, prepaid items, and normalized working capital
□ Assumed and excluded liabilities, debt-like items, customer deposits, gift cards, and warranties
□ Purchase-price components: cash, debt, seller note, earnout, escrow, holdback, and contingent payments

2. Financial Statements and Revenue Reconciliation

Request enough monthly history to understand trend and seasonality. The goal is not merely to receive statements; it is to reconcile material revenue and expense claims across independent records and explain differences.

□ Three years of federal, state, and local business tax returns with proof of filing
□ Monthly profit-and-loss statements, balance sheets, cash-flow statements, and trial balances
□ Current year-to-date results compared with the same prior-year period
□ General ledger and chart of accounts for the periods used in the seller’s earnings calculation
□ Business bank statements, deposit detail, merchant-processor statements, invoices, and sales reports
□ Revenue and gross profit by customer, service or product, channel, location, and month
□ Accounts-receivable aging, write-offs, credits, refunds, chargebacks, bad debt, and collection policy
□ Accounts-payable aging, accrued expenses, unpaid purchases, and related-party balances
□ Debt schedule, credit lines, leases, guarantees, covenant compliance, and payoff requirements
□ Budget, forecast, and forecast-to-actual history with the assumptions behind projected growth

3. SDE, EBITDA, and Add-Back Verification

Rebuild claimed seller’s discretionary earnings or EBITDA from the underlying statements. Label every adjustment verified, reasonable but unverified, disputed, recurring, or buyer-specific. A multiple applied to an overstated earnings figure compounds the error.

□ Reconciliation from tax-return profit to internal statements and the marketed earnings figure
□ Owner payroll, benefits, distributions, personal expenses, and duties performed
□ Ledger detail and receipts supporting every discretionary or nonrecurring add-back
□ Market compensation and payroll burden for owner work the buyer will not perform
□ Related-party rent, wages, purchases, sales, management fees, and loans normalized to market terms
□ Deferred maintenance, suppressed marketing, understaffing, uninsured risk, and temporarily reduced expenses
□ One-time revenue, grants, insurance proceeds, unusual credits, and nonoperating income
□ Maintenance capital expenditure, replacement cycle, and working-capital requirements excluded from SDE
□ Base, downside, and stress cases using reconciled—not advertised—cash flow

4. Customers, Contracts, and Market Quality

Revenue is valuable only if it survives the transaction at an acceptable margin. Measure concentration using revenue and gross profit, then inspect contracts, churn, pricing, service obligations, and owner relationships.

□ Top one, five, ten, and twenty customers by revenue and gross profit for three years
□ Customer agreements, renewal and termination rights, assignment, change-of-control, and consent clauses
□ Recurring, repeat, project-based, seasonal, and one-time revenue separated
□ Churn, retention, cohort behavior, backlog, pipeline definitions, and win-rate evidence
□ Pricing history, discounts, rebates, credits, warranties, returns, and service-level penalties
□ Sales channel dependence, referral sources, platform exposure, and owner-managed relationships
□ Market size and competition claims matched to named, current sources
□ Customer complaints, privacy obligations, security commitments, and unresolved disputes

5. Employees, Owner Dependence, and Transition

Build a day-one operating plan without assuming the seller will remain indefinitely. Identify the people, credentials, approvals, and undocumented knowledge required to keep the company lawful and productive.

□ Employee roster with role, tenure, location, compensation, bonus, benefits, and employment status
□ Payroll registers, tax filings, benefit plans, accrued leave, commissions, and change-in-control obligations
□ Employee versus contractor classification and supporting agreements
□ Key-person dependence, succession depth, retention risk, and replacement recruiting cost
□ Owner’s actual weekly duties, hours, customer relationships, approvals, passwords, and licenses
□ Employment claims, wage-and-hour issues, workers’ compensation, safety incidents, and investigations
□ Handbooks, restrictive covenants, invention assignments, confidentiality, and intellectual-property ownership
□ Seller training plan, introductions, availability, measurable deliverables, and transition duration

6. Operations, Technology, Assets, and Suppliers

Trace how orders become cash and where operations can stop. Document critical processes, capacity, quality controls, inventory, equipment, vendors, data, and systems. Price deferred investment rather than treating it as a surprise after closing.

□ Process maps, operating procedures, quality records, capacity, backlog, lead times, and downtime
□ Supplier concentration, agreements, credit terms, rebates, allocations, exclusivity, and transferability
□ Inventory quantities, valuation method, aging, obsolescence, consignment, shrinkage, and count procedure
□ Fixed-asset register, titles, serial numbers, ownership, liens, condition, maintenance, and replacement dates
□ Vehicle and equipment leases, service contracts, warranties, inspections, and deferred repairs
□ Software subscriptions, licenses, integrations, source code, domains, phone numbers, and account ownership
□ Cybersecurity controls, access lists, backups, incidents, insurance claims, privacy notices, and recovery tests
□ Intellectual-property registrations, work-for-hire terms, assignments, open-source use, and infringement claims

7. Legal, Tax, Property, Insurance, and Public Records

Seller disclosures are essential but not sufficient. Search relevant official sources using exact legal names, aliases, addresses, owners, and jurisdictions. Document both matches and coverage limits; an empty search result is not a guarantee that no record exists.

□ Secretary of State formation, status, ownership filings where available, and good-standing evidence
□ UCC financing statements, amendments, continuations, terminations, debtor-name variants, and payoff releases
□ Federal, state, and local tax filings, assessments, payment status, liens, and successor-risk review
□ Federal and state court dockets, judgments, bankruptcy records, administrative matters, and threatened claims
□ Professional, occupational, facility, environmental, and local licenses with transfer or reapplication rules
□ OSHA inspections and enforcement, DOL records, EPA facility and enforcement data, and industry regulators
□ FMCSA registration, operating authority, inspection, crash, and out-of-service data when transportation applies
□ Insurance policies, loss runs, exclusions, limits, deductibles, audits, lapses, and post-closing availability
□ Lease term, rent, CAM, escalations, options, assignment, landlord consent, guarantees, repairs, and permitted use
□ Environmental questionnaires, assessments, tanks, hazardous materials, spills, waste, emissions, and remediation
□ Material contracts, disputes, warranties, indemnities, franchise terms, permits, and change-of-control provisions

8. Financing, Price, and Buyer Return

A lender’s willingness to finance a deal does not establish value. Model the acquisition using normalized earnings, complete cash requirements, conservative debt terms, and operating reserves. Keep the buyer’s compensation for labor separate from the return on invested equity.

□ Purchase price divided by verified SDE or EBITDA, with comparable-range limitations documented
□ Annual principal and interest, preliminary DSCR, and lender covenant assumptions
□ Equity injection, transaction fees, lender costs, taxes, inventory, repairs, and post-close reserve
□ Buyer or replacement-manager compensation, payroll burden, benefits, and recruiting cost
□ Maintenance and growth capex, normal working capital, seasonality, and cash conversion
□ Downside cases for revenue loss, margin pressure, wage increases, rate changes, and customer departure
□ Return on equity and cash availability after debt, taxes, capex, working capital, and owner compensation
□ Sensitivity table showing which assumptions cause the investment or financing case to fail

9. Findings, Protections, and Closing Conditions

Convert each material finding into an owner and an action. The available responses are to clear it, accept it, quantify and reprice it, remediate it, insure it, allocate it contractually, delay closing, or stop. Do not let unresolved items disappear into a long report.

□ Evidence log with source, period, entity match, retrieval date, reviewer, and limitations
□ Issue register showing severity, confidence, estimated exposure, next evidence, owner, and deadline
□ Seller-request list for missing, inconsistent, stale, or illegible records
□ Closing conditions for financing, lien releases, lease and contract consents, licenses, repairs, and approvals
□ Purchase-price and working-capital adjustment mechanics
□ Representations, warranties, indemnities, escrows, holdbacks, earnouts, and insurance considered with counsel
□ Final funds flow, payoff letters, release mechanics, asset and inventory schedules, and closing deliverables
□ Written no-go criteria for unresolved, unlawful, uninsurable, or continuity-threatening exposure

10. Re-Verification Immediately Before Closing

Diligence has a shelf life. Compare the facts at closing with the assumptions that supported the LOI and purchase agreement. Preserve earlier versions rather than overwriting them so the closing team can see what changed.

□ Latest monthly financials, bank activity, receivables, payables, debt, inventory, and cash requirements
□ New customer losses, contract changes, employee departures, incidents, claims, or equipment failures
□ Refreshed entity status, UCC, litigation, bankruptcy, licensing, safety, environmental, and regulatory searches
□ Final lease, landlord and contract consents, insurance binders, licenses, and financing approval
□ Versioned closing report stating what was checked, when, under which identifiers, what changed, and what remains unresolved

How to Document a Finding

A useful finding states the claim tested, the evidence reviewed, the observation, the source limitation, the calculation or inference, the possible consequence, and the next action. For example: the seller reports no secured debt; a UCC search under the exact entity name returned an active financing statement; status and collateral scope remain unverified; obtain the filing, lender payoff, and termination requirements with counsel before closing.

This structure avoids two dangerous extremes: treating every database match as the target company, or interpreting an empty result as proof that no problem exists. It also turns diligence into a decision system that buyers, CPAs, attorneys, lenders, and advisers can review together.

Frequently Asked Questions

How long should business acquisition due diligence take?

There is no universal period. Timing depends on the company, financing, record quality, regulation, consents, and issues found. The LOI should allow enough time and access to resolve material questions.

What documents should I request first?

Start with tax returns, monthly financial statements, current year-to-date results, bank or merchant support, the add-back schedule, customer concentration, owner duties, the lease, debt, and material contracts. These establish whether economics and transferability justify deeper work.

Does this checklist replace a lawyer or CPA?

No. It organizes the buyer’s investigation and evidence. Attorneys, accountants, lenders, insurers, and specialists should interpret matters within their professional scope.

Does a clean public-record search prove there are no liabilities?

No. Public sources vary in coverage, identifiers, timing, and access. A report should state exactly what was searched and what the result can and cannot establish.

What should happen when diligence finds a problem?

Verify the issue, quantify its possible impact, and decide whether to clear, remediate, insure, reprice, allocate, delay, or stop. The purchase agreement should reflect material resolutions.

This checklist provides preliminary educational and organizational support. It is not an audit, appraisal, legal opinion, accounting review, lending decision, or recommendation to buy. Verify current requirements and material findings with qualified advisers and official sources.