Filtering the Due Diligence List
About the play
This play is designed to speed up the due diligence process and make your list as efficient as possible.
Preparation
Making the due diligence process more efficient saves time and money.
One of the best ways to do make the diligence process more efficient is to filter the due diligence list from start to finish. Throwing 300 questions at the target company can be daunting and be a distraction to the business you are trying to buy.
Execute this play to filter your due diligence list and make the list easier for the target company to digest. Diligence is usually separated into two phases, with totally different purposes, and the questions need to be asked accordingly.
The first phase of the process should focus on answering the question; do we have a deal or not? Stopping at the eleventh hour is painful for everyone. The second phase is involves the integration questions and how the company will fit in your company post-close.
People
Head of Corp Dev, Functional Teams, Inbound CEO
Difficulty
Easy
Materials
Due Diligence List, Collaboration, Common Sense
Time
30 minutes each Sprint (3 Sprints Total)
Running the Play:
Make the List Visible to Everyone
Put all the due diligence questions into a live sheet or database so that everyone can see the full picture.
Add Categories and Status
In the interest of collaboration and avoiding redundancy, add categories and status on each question.
Status
- Open - these are the questions that you need to be answered
- In-progress - these are the questions that have been already asked
- Resolved - these are the questions that have been already answered
- N/A - these are the questions not applicable to the target company
Category
- Location - this is where people can put the document's location in the data room to avoid "treasure hunting"
- Priority - this is where you set the priority: high, medium, or low, based on the deal rationale
Filtering for First Sprint of Diligence
During this phase, answer the question; do we have a deal or not? Based on the deal rationale, the head of corp dev can take a pass at the due diligence list.
Identify and mark not applicable questions in the list
Set prioritizations on the key questions that will help identify if the company should proceed with the deal.
Filtering for Second Sprint of Diligence
- Set up a meeting with the functional team that will be involved in the deal. Make sure they understand the deal rationale.
- Give them access to the list for filtering.
- Set priorities
- Identify and mark not applicable questions in the list
Sharing with the inbound CEO
Now that the list is more presentable and efficient, share it with the target's CEO.
- Explain that you want the high priorities first.
- They need to mark items as non-applicable as soon as possible.
- Make sure they understand that it's ok if they don't have the document or the material. Do not make new materials or the process will take longer.
- Explain why you are asking the questions.
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