--- name: transaction-due-diligence-checklist-generator description: "Generates a tailored M&A due diligence checklist across 7 workstreams (commercial, financial, legal, tax, HR, IT, regulatory/ESG) calibrated to transaction structure, deal size, and sector — with request-list line items, red-flag triggers, owner assignments, and priority tiers. Use when scoping diligence for an asset purchase, stock purchase, merger, or carve-out, building a data room request list, or preparing a diligence workplan for a specific deal." argument-hint: "[transaction-type] [sector]" allowed-tools: ["Read"] --- # Transaction Due Diligence Checklist Generator ## Purpose Produce a deal-specific due diligence checklist — organized by workstream and calibrated to the transaction structure, deal size, and sector — that a corporate development team or deal counsel can drop into a data room request list and workplan immediately. Eliminates the generic-template problem where standard checklists miss structure-specific risks (successor liability in asset deals, stranded costs in carve-outs, change-of-control triggers in stock deals). ## When to Use Invoke this skill when the user asks to: - Build a due diligence checklist or request list for a specific acquisition or merger - Scope diligence workstreams for an asset purchase, stock purchase, merger, or carve-out - Create a data room request list to send to a target or seller - Prepare a diligence workplan with owners and priorities before kickoff - Identify structure-specific or sector-specific diligence risks for a deal in progress - Localize a generic diligence template to a deal's size, sector, and structure ## Inputs Required Before starting, collect: - **Transaction type**: Asset purchase / stock (equity) purchase / merger / carve-out (or "not yet decided") - **Deal size**: Approximate enterprise value or transaction value band - **Sector**: Target's industry (e.g., SaaS, manufacturing, healthcare services, financial services) - **Target profile**: Public or private, headcount, jurisdictions of operation - **Deal thesis**: The one-line rationale — what the buyer is actually acquiring (technology, customer base, capacity, IP, market entry) - **Known concerns**: Any specific risks flagged pre-LOI (litigation, customer concentration, regulatory scrutiny) - **Timeline**: Target signing/closing date or diligence window length If transaction type is "not yet decided," generate for stock purchase (the broadest scope) and flag the items that change under an asset structure or carve-out. ## Instructions ### Generate Checklist Items Across 7 Workstreams For each workstream, produce request-list line items. Every item includes: - **Request**: The specific document, data set, or confirmation to obtain (not "review financials" — name the artifact) - **Priority**: Tier 1 (deal-breaker / gating) / Tier 2 (material to valuation or terms) / Tier 3 (confirmatory / integration-planning) - **Owner**: The functional lead responsible (Finance, Legal, Commercial, HR, IT, Tax, or external advisor) - **Red flag**: The specific finding that would trigger escalation, a purchase-price adjustment, an indemnity/escrow, or walkaway Calibrate item count and depth to deal size: small deals (<$50M) get a focused core list; large deals get expanded sub-items and specialist workstreams. --- **Workstream 1 — Commercial & Market (10–14 items)** Validate the deal thesis against market reality. - Customer contracts, top-20 revenue concentration, churn/retention cohorts, pipeline - Change-of-control and assignment clauses in key customer/supplier contracts (critical in stock deals and carve-outs where consents are required) - Competitive positioning, market sizing, pricing history, backlog quality - Red-flag focus: revenue concentration >20% in one customer, contracts with termination-on-COC, unrenewed marquee accounts **Workstream 2 — Financial & Accounting (12–16 items)** Confirm quality of earnings and normalize the numbers. - Audited financials (3 years), monthly management accounts, QoE report scope - Working capital normalization, net debt schedule, add-back substantiation, revenue recognition policy - Off-balance-sheet items, related-party transactions, deferred revenue treatment - In carve-outs: standalone/carve-out financials, allocated corporate costs, stranded-cost estimate, TSA scope - Red-flag focus: aggressive revenue recognition, unexplained margin trends, add-backs >15% of EBITDA, undisclosed related-party dealings **Workstream 3 — Legal & Corporate (12–16 items)** Establish clean title and surface liabilities. - Corporate records, cap table, prior financing docs, minute books, IP assignments and registrations - Material contracts, litigation and claims register, guarantees and indemnities - Structure-specific: in asset deals, itemize which assets/liabilities transfer and flag successor-liability exposure; in stock deals, all liabilities travel with the entity — expand contingent liability review - Permits, licenses, and their transferability under the chosen structure - Red-flag focus: gaps in IP chain of title, undisclosed litigation, non-transferable core permits, unfavorable change-of-control provisions in debt **Workstream 4 — Tax (8–12 items)** Assess historical exposure and structure efficiency. - Tax returns (3–5 years), audit history, transfer pricing documentation, NOL/carryforward positions - Nexus and sales/use tax exposure, VAT/GST, employment tax, R&D credits claimed - Structure impact: step-up availability in asset deals, tax attributes preserved/lost in stock deals, tax-free reorganization qualification in mergers - Red-flag focus: open audits, uncertain tax positions (FIN 48 reserves), sales-tax nexus exposure, transfer-pricing without contemporaneous docs **Workstream 5 — Human Resources & Benefits (8–12 items)** Quantify people liabilities and retention risk. - Org chart, key-person dependency, employment agreements, non-competes, comp and bonus plans - Benefit plans, pension/defined-benefit obligations, accrued PTO and severance liability - Structure-specific: in asset deals and carve-outs, employee transfer mechanics, WARN Act / TUPE obligations, which employees actually move - Change-of-control triggers on equity, golden parachutes, retention needs - Red-flag focus: single-point-of-failure key persons, underfunded pension, unvested equity accelerating on close, litigation from current/former employees **Workstream 6 — IT, Data & Cybersecurity (8–12 items)** Assess technology assets, dependencies, and risk. - Systems inventory, software licenses and license compliance, technical debt assessment - Cybersecurity posture, breach history, penetration test results, data privacy compliance (GDPR/CCPA) - Structure-specific: in carve-outs, shared IT infrastructure, TSA dependencies, data separation timeline and cost - Third-party/open-source software licensing, source-code escrow, cloud vendor concentration - Red-flag focus: prior breach without remediation, license non-compliance, heavy shared-infrastructure dependency requiring long TSA, unpatched critical systems **Workstream 7 — Regulatory, Environmental & ESG (6–10 items)** Clear the deal to close and surface long-tail exposure. - Antitrust/merger control filings required (HSR, EU, other jurisdictions), CFIUS/foreign-investment review triggers - Sector-specific regulatory licenses and compliance history (calibrate heavily by sector — financial services, healthcare, and defense expand this workstream substantially) - Environmental liabilities, permits, Phase I/II assessments for asset-heavy targets - Anti-corruption (FCPA/UK Bribery Act), sanctions/OFAC exposure, ESG commitments and reporting - Red-flag focus: antitrust filing threshold met, CFIUS-reportable foreign buyer, active regulatory enforcement action, environmental remediation liability --- ### Sector & Structure Calibration Notes After the workstreams, produce a short calibration section that: 1. Names the 3–5 workstream items most elevated by this specific sector 2. Names the items that change materially based on the chosen transaction structure 3. Flags any items that become gating (Tier 1) specifically because of deal size or jurisdiction (e.g., HSR threshold, foreign merger control) ## Output Format - **Structure**: 7 workstream sections, each a table or structured list with Request / Priority / Owner / Red Flag columns; followed by a Sector & Structure Calibration section - **Length**: 1,400–1,900 words - **Format**: Structured checklist (tables or labeled bullet blocks) — built to be lifted directly into a request list, not prose - **Sections**: Commercial → Financial → Legal → Tax → HR → IT → Regulatory/ESG → Calibration notes - **Tone**: Deal-team practitioner — precise, risk-oriented, no filler; every item names a real artifact or confirmation ## Quality Checklist Before delivering output, verify: - [ ] All 7 workstreams are present with item counts within the stated ranges - [ ] Every line item names a specific artifact or confirmation — no "review the financials" placeholders - [ ] Every item carries a Priority tier, an Owner, and a Red Flag - [ ] Structure-specific items are explicitly called out (asset vs. stock vs. merger vs. carve-out) — not a generic list - [ ] Regulatory workstream reflects the actual sector and jurisdictions provided, including any merger-control/CFIUS triggers - [ ] The Calibration section names the 3–5 items most elevated by this deal's sector, structure, and size ## Notes - Asset purchases and carve-outs are the highest-effort structures for diligence — asset deals require itemizing what transfers, and carve-outs add standalone financials, stranded costs, and TSA scoping that don't exist in a clean stock deal. - Change-of-control clauses are the most commonly under-scoped risk: they appear in customer contracts, debt, leases, licenses, and equity plans, and their impact flips entirely between asset and stock structures. - For cross-border deals, treat merger control and foreign-investment review (CFIUS and equivalents) as gating Tier 1 items — they set the closing timeline regardless of commercial readiness. - If deal size or timeline is tight, recommend running Tier 1 items first as a "gating diligence" phase before committing full workstream resources. --- ## How to use this skill This file is a Claude Code skill in [Anthropic's standard format](https://docs.anthropic.com/en/docs/claude-code/skills) — markdown with YAML frontmatter at the top. **Installing in Claude Code:** - `~/.claude/skills//SKILL.md` — auto-loads in every session anywhere on your machine (recommended for skills you'll use across multiple projects) - `/.claude/skills//SKILL.md` — auto-loads only when working in that project (recommended for project-specific skills) Restart Claude Code or open a new session to register. **Using in Claude.ai, ChatGPT, Gemini, or other AI tools:** 1. 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