M&A Due Diligence Checklist: 30 Operational Signals
A financial process reads the numbers the seller prepared. The deals that lose 30 to 50 percent of their value nine months after closing were never lost on the numbers; they were lost on three senior engineers, two large clients and a founder who disengaged, all of it visible before due diligence to someone who had been inside the company.
These thirty signals are what our team reads inside a target before a process starts. Put them next to your financial checklist.
The full checklist is on this page. Leave your email for the PDF version and our market updates.
Companies our team has worked inside
What's inside: the 30 signals
Founder dependency, six signals
The most common post-close value erosion, and the least visible in a data room.
- Share of revenue where the founder personally owns the client relationship
- Share of the team that joined because of the founder and would follow them out
- Decisions that cannot ship without the founder in a normal week
- A succession plan that exists on paper and has been exercised at least once
- What the founder does after the LOI, in writing, and for how long
- Who owns the top three client relationships in the CRM and in reality
Delivery maturity, five signals
Whether the delivery holds together when the people who built it step back.
- A documented project-management playbook that the teams actually follow
- Escalation patterns: who notices a slipping project and how fast
- Knowledge management: where the decisions and the documentation live
- Post-mortem culture: what the last three incidents changed
- Project recovery history: which troubled projects were saved, and how
Client concentration and quality, five signals
The haircut buyers apply to the price, and the reasons behind it.
- Top client as a share of revenue
- Top three clients as a share of revenue
- Client tenure: how long the top ten have stayed
- Contract structures: master agreements, notice periods, change-of-control clauses
- Pipeline diversity: where the next ten clients would come from
Team stability, five signals
Who stays through a change of ownership.
- Retention of the key engineers over the last two years
- Leadership team tenure and who was hired from outside
- Average tenure across the company
- Recent departures: who left in the last twelve months and why
- Retention instruments already in place: bonuses, equity, golden handcuffs
Financial hygiene, five signals
What a financial process sees, read with the operations next to it.
- Revenue recognition policy and how it matches the contracts
- Working capital practice: receivables, advances, payroll timing
- Intercompany transactions and their documentation
- Tax structure complexity across jurisdictions
- Audit history: who audited, when, with what findings
Operational risk, four signals
The company-level answer to the country question.
- Geographic distribution of the team, city by city
- Continuity planning: power, connectivity, office, and the test of it
- IP protection: assignments, registrations, open-source hygiene
- Cybersecurity maturity: policies, incidents, certifications
Who is this for
For the people who decide whether a target is worth six months of process:
- Corporate development leads and fund partners who need pre-qualification before a formal process
- CEOs and COOs of strategic acquirers who want to know whether the company integrates and the founder stays committed
- CTOs and CPOs acquiring a team or an AI studio who need to know whether the engineers and the capability survive the deal
Use it to brief your advisors and to structure the questions for the founder; where you want the read from inside, send us the target.
Want the operational read before the process?
Companies our team has worked inside
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