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name: due-diligence description: Transaction due diligence skill for M&A, investment, and business transactions. Use when the user needs assistance with due diligence checklists, diligence review, risk assessment, diligence reports, or data room organization. Triggers on keywords like "due diligence", "diligence", "data room", "DD checklist", "diligence findings", "risk assessment", "transaction review", "investment review".

Due Diligence

This skill provides expert guidance for conducting comprehensive due diligence in business transactions.

Core Capabilities

1. Diligence Planning

• Scope definition
• Checklist development
• Team coordination
• Timeline management

2. Document Review

• Systematic analysis
• Issue identification
• Risk categorization
• Finding documentation

3. Risk Assessment

• Material findings
• Deal impact analysis
• Mitigation strategies
• Remediation requirements

4. Reporting

• Executive summaries
• Detailed findings
• Risk matrices
• Recommendation memos

Due Diligence Process

Diligence Workflow

┌─────────────────────────────────────────────────────────────────┐
│                    DUE DILIGENCE PROCESS                         │
├─────────────────────────────────────────────────────────────────┤
│                                                                  │
│  Scoping →  Information →  Review →  Analysis →  Reporting      │
│            Request                                               │
│                                                                  │
│    ↓           ↓            ↓          ↓           ↓            │
│                                                                  │
│  - Define    - Send DDL    - Document  - Risk      - Executive  │
│    scope     - Set up       review     assessment   summary     │
│  - Assign     data room   - Expert    - Issue      - Detailed   │
│    teams    - Track         consult    tracking     findings    │
│  - Create    responses    - Follow-up - Mitigation - Risk       │
│    timeline              questions    strategies    matrix      │
│                                                                  │
└─────────────────────────────────────────────────────────────────┘

Team Structure

Team	Focus Areas
Legal	Corporate, contracts, litigation, IP, employment
Financial	Financials, accounting, tax, working capital
Business	Operations, customers, market, strategy
Technical	Technology, products, cybersecurity
Environmental	Environmental compliance, liabilities
HR	Employee matters, benefits, culture

Diligence Request Categories

Corporate/Organizational

1. FORMATION DOCUMENTS
   □ Certificate/Articles of Incorporation
   □ Bylaws/Operating Agreement
   □ Amendments
   □ Good standing certificates

2. CAPITALIZATION
   □ Cap table (fully diluted)
   □ Stock ledger
   □ Option/warrant agreements
   □ Convertible instruments

3. GOVERNANCE
   □ Board minutes (3-5 years)
   □ Shareholder minutes
   □ Written consents
   □ Committee minutes

4. EQUITY AGREEMENTS
   □ Shareholder agreements
   □ Voting agreements
   □ Registration rights
   □ ROFR agreements

Contracts & Commercial

5. CUSTOMER CONTRACTS
   □ Top 20 customers by revenue
   □ Standard forms
   □ Customer concentration analysis
   □ Pricing arrangements

6. SUPPLIER CONTRACTS
   □ Top 20 suppliers
   □ Single-source suppliers
   □ Key terms and pricing

7. STRATEGIC AGREEMENTS
   □ Joint ventures
   □ Partnerships
   □ Distribution agreements
   □ License agreements

8. REAL ESTATE
   □ Leases
   □ Owned property
   □ Environmental assessments

Financial & Tax

9. FINANCIAL STATEMENTS
   □ Audited (3 years)
   □ Interim statements
   □ Management accounts
   □ Audit letters

10. DEBT & FINANCING
    □ Credit agreements
    □ Loan documents
    □ Security agreements
    □ Compliance certificates

11. TAX
    □ Tax returns (3-5 years)
    □ Tax provisions
    □ IRS correspondence
    □ Transfer pricing

Employment & Benefits

12. EMPLOYMENT
    □ Employee census
    □ Executive agreements
    □ Offer letter forms
    □ Handbook/policies

13. COMPENSATION
    □ Compensation data
    □ Bonus plans
    □ Equity plans
    □ Commission structures

14. BENEFITS
    □ Benefit plan documents
    □ 401(k) plans
    □ Insurance policies
    □ COBRA compliance

Intellectual Property

15. IP PORTFOLIO
    □ Patent list and status
    □ Trademark registrations
    □ Copyright registrations
    □ Domain names

16. IP AGREEMENTS
    □ License agreements (in/out)
    □ Assignment agreements
    □ Development agreements
    □ Open source usage

Litigation & Regulatory

17. LITIGATION
    □ Pending matters
    □ Threatened claims
    □ Settlement agreements
    □ Insurance coverage

18. REGULATORY
    □ Permits and licenses
    □ Government correspondence
    □ Compliance certifications
    □ Investigation history

Data Room Organization

Standard Folder Structure

📁 1. Corporate
   📁 1.1 Formation Documents
   📁 1.2 Good Standing
   📁 1.3 Capitalization
   📁 1.4 Board Minutes
   📁 1.5 Shareholder Minutes
   📁 1.6 Equity Agreements

📁 2. Financial
   📁 2.1 Audited Financials
   📁 2.2 Interim Financials
   📁 2.3 Budget & Projections
   📁 2.4 Debt Documents

📁 3. Tax
   📁 3.1 Tax Returns
   📁 3.2 Tax Provisions
   📁 3.3 Correspondence

📁 4. Material Contracts
   📁 4.1 Customer Contracts
   📁 4.2 Supplier Contracts
   📁 4.3 Strategic Agreements
   📁 4.4 Real Estate

📁 5. Intellectual Property
   📁 5.1 Patents
   📁 5.2 Trademarks
   📁 5.3 Licenses
   📁 5.4 Software

📁 6. Employment
   📁 6.1 Agreements
   📁 6.2 Compensation
   📁 6.3 Benefits
   📁 6.4 Policies

📁 7. Litigation
   📁 7.1 Pending
   📁 7.2 Threatened
   📁 7.3 Settled

📁 8. Regulatory
   📁 8.1 Permits
   📁 8.2 Compliance
   📁 8.3 Environmental

📁 9. Insurance

📁 10. IT/Technology

Data Room Best Practices

• Consistent naming conventions
• Version control
• Index with descriptions
• Access logging
• Watermarking (if needed)
• Q&A tracking

Risk Assessment Framework

Risk Categories

Category	Impact	Examples
Critical	Deal breaker	Fraud, undisclosed litigation, title defects
High	Price adjustment	Material contract issues, key employee departure
Medium	Post-close item	Compliance gaps, documentation deficiencies
Low	Note for file	Minor administrative issues

Risk Matrix Template

| # | Issue | Category | Risk Level | Deal Impact | Mitigation |
|---|-------|----------|------------|-------------|------------|
| 1 | [Finding] | Corporate | Critical | [Impact] | [Mitigation] |
| 2 | [Finding] | Contracts | High | [Impact] | [Mitigation] |
| 3 | [Finding] | Employment | Medium | [Impact] | [Mitigation] |

Common Red Flags

Corporate

• Missing or incomplete records
• Unauthorized equity issuances
• Undocumented related party transactions
• Governance violations

Contracts

• Change of control triggers
• Assignment restrictions
• Unusual termination rights
• Missing key contracts

Financial

• Unexplained adjustments
• Related party transactions
• Off-balance sheet liabilities
• Revenue recognition issues

Employment

• Key person dependency
• Non-compete enforceability
• Misclassification issues
• ERISA violations

IP

• Ownership questions
• License restrictions
• Open source contamination
• Infringement claims

Litigation

• Undisclosed claims
• Insurance coverage gaps
• Regulatory investigations
• Pattern of disputes

Due Diligence Report

Executive Summary Template

EXECUTIVE SUMMARY

TRANSACTION OVERVIEW
- Target: [Company]
- Deal Structure: [Stock/Asset Purchase]
- Purchase Price: $[Amount]
- Closing Date: [Anticipated]

DILIGENCE SCOPE
[Description of scope and limitations]

KEY FINDINGS SUMMARY
1. [Critical/High Risk Issue #1]
2. [Critical/High Risk Issue #2]
3. [Material Issue #3]

DEAL IMPACT
[Overall assessment and recommendations]

RECOMMENDED ACTIONS
1. [Pre-closing requirement]
2. [Purchase agreement protection]
3. [Post-closing item]

Detailed Findings Format

FINDING: [Title]

Category: [Corporate/Contracts/IP/Employment/Litigation/Tax/Other]
Risk Level: [Critical/High/Medium/Low]

Description:
[Detailed description of finding]

Documents Reviewed:
- [Document 1]
- [Document 2]

Analysis:
[Legal/business analysis of the issue]

Deal Impact:
[How this affects the transaction]

Recommended Mitigation:
[Suggested resolution]

Questions for Seller:
1. [Question]
2. [Question]

Diligence Timeline

Typical Timeline (Acquisition)

Phase	Duration	Activities
Week 1	Setup	Send DDL, organize team, data room access
Week 2-3	Initial Review	Review priority documents, identify issues
Week 4	Deep Dive	Follow-up questions, expert consultations
Week 5	Analysis	Risk assessment, findings compilation
Week 6	Reporting	Draft report, team review, deliver

Milestone Checklist

• Data room access confirmed
• Initial document review complete
• Management meetings conducted
• Expert consultations complete
• Follow-up questions answered
• Risk matrix finalized
• Draft report circulated
• Final report delivered

Integration with Other Skills

• corporate-ma: M&A transaction due diligence
• contract-lifecycle: Contract analysis
• intellectual-property: IP due diligence
• employment-labor: Employment matters review
• environmental-law: Environmental due diligence

Reference Files

For detailed guidance:

• references/checklist-templates.md - Due diligence request lists
• references/report-templates.md - Report format examples
• references/risk-matrices.md - Risk assessment frameworks