What are the best practices for creating and managing a due diligence checklist excel template?

I would add, what can you do internally and what needs to be done externally. Also question what is done only because it was done in the past (to pleasure certain stakeholder in the company) and what is really crucial. For all questions you raise you will receive data and you need to handle it properly (is your team capable of that) Also check if and how you adress ESG and also if there are different legal jursidictions in place. In any case, if it is not a rather small target i would not recommend to use excel and rathe gor for tools that help you steering the questions, allow you to store and share answers and also finally document these answers to be used in the contract.

Consider Microsoft's acquisition of Activision Blizzard in 2023. Their due diligence was clearly defined to assess: (1) potential antitrust concerns, (2) integration challenges, (3) the cultural fit between companies, and (4) the long-term value proposition in the gaming industry. This targeted approach, informed by well-defined scope and objectives, enabled Microsoft to make a strategic decision with well-understood risks and potential returns. Due diligence has historically been a cornerstone of responsible business practices, ensuring informed decision-making in mergers and acquisitions. In today's complex and dynamic markets, its importance is amplified as transactions become increasingly intricate and cross-border.

In my experience it’s critical to define what should be the key takeaways from your DD prior to starting the exercise. This doesn’t mean you should not evaluate the other details but just where you should concentrate upon. For example if you are acquiring the company for the IP or tech know how then a FTO analysis or IP diligence is critical, likewise if you are doing an asset deal then you should put extra care to ensure there aren’t any encumbrances.

The 3 principles of a great Due Diligence excel template are: Collaborative - People working on various aspects - accounting, tax, finance etc - should be able to get a view on what’s happening in other parts so that they know whether some issues may affect their work Dynamic - People should be authorised to add or remove items as the DD progresses Exhaustive - At the beginning, all possible scenarios should be covered

Consider Disney's acquisition of 21st Century Fox in 2019. Their due diligence went beyond standard financial metrics. They delved deep into intellectual property rights, regulatory approvals, content library valuations, and audience demographics, customizing their checklist to address the specific complexities of acquiring a media and entertainment giant. This tailored approach helped them identify potential challenges and opportunities, ultimately leading to a successful deal. Research by KPMG suggests that transactions preceded by industry-specific due diligence experience a 10% reduction in post-acquisition integration challenges.

While we pick up standard due diligence checklists, including WHERE in the process we are (Pre-LOI vs. Formal Due Diligence, for example), it's crucial to customize the checklist based on the deal itself. Even between manufacturing companies, where we play often, there can be major differences, even if they're in the same industry! Also, it's important to highlight that cybersecurity and contracts are becoming very important in manufacturing. Many A&D/Space manufacturers are handling sensitive DoD data, so CMMC compliance is becoming more critical for deals.

Clear, consistent formats in Excel, or other tools, are very important. What's equally important is indexing these items for tracking very clearly. especially if you're working inside a regulated broker-dealer for compliance purposes. Coloring by area of Due Diligence and coordinating those items/colors with Virtual Data Room (VDR) folders helps immensely as well.

Consider Blackstone's acquisition of Biomet in 2023. Their due diligence checklist employed a clear, color-coded format. Each category (financial, legal, regulatory, etc.) had distinct colors, and priority items were highlighted, allowing their team to quickly identify and focus on crucial information. This structured approach helped them complete due diligence efficiently and make an informed investment decision. By prioritizing clarity and consistency in your due diligence checklist format, you can transform it from a static document to a dynamic tool. Utilize logical organization, actionable labels, and visual cues to enhance information accessibility and analysis.

Creating an effective due diligence checklist in Excel hinges on clear roles and responsibilities. I've seen this approach streamline processes significantly. Assign tasks to team members based on their expertise, ensuring accountability and efficiency. This method turns the checklist into a well-oiled machine, with each part playing its role to perfection. Remember, clarity in delegation is the key to unlocking thorough and swift due diligence.

Consider Microsoft's acquisition of Activision Blizzard in 2023. They employed a dedicated due diligence team with clearly assigned roles. Legal experts handled regulatory approvals, financial analysts reviewed financial statements, and industry specialists evaluated market trends. Regular team meetings and online collaboration platforms ensured clear communication and timely issue resolution. This structured approach contributed to a successful and efficient due diligence process. Remember, a well-orchestrated due diligence team is not just a group of individuals; it's a collective force driving informed decision-making.

Consider Netflix's acquisition of DreamWorks Animation in 2023. They employed a dynamic due diligence process, continuously updating their checklist with newly discovered intellectual property rights, evolving audience demographics, and potential regulatory hurdles. Regular team meetings and stakeholder presentations ensured transparent communication and facilitated informed decision-making throughout the process. This iterative approach helped them identify both risks and opportunities, ultimately leading to a successful acquisition. Remember, a regularly updated and reviewed checklist is not just a document; it's a compass guiding you towards a successful transaction.

Consistently soliciting feedback from stakeholders is key to having a diligence template that truly works for everyone. The catch, these individuals are usually extremely busy and focused on working within the business vs. on diligence. What we've found work well is doing quick post-mortems after each deal as well as holding weekly diligence meetings. More importantly, having ongoing weekly integration meetings once the deal is closed to ensure that everyone is on the same page.

1. Learn from experienced professionals - Ask for advice from those who have done similar deals. 2. Leverage online resources - Use templates and tools from websites and blogs to improve efficiency. 3. Tailor to your specific needs - Adapt templates to fit your unique deal and industry requirements. 4. Example: A software company may need more IP and cybersecurity items than a manufacturer. 5. Continuously update and review - Regularly update the template as new information emerges.

In a transaction multiple parties are involved, thus a checklist should be of use for all such parties. Ideally use a cloud based dataroom and checklist system with clear demarcation, proper numbering, color codes, authority matrix and a checking system. This will allow the master checklist to be updated in real time for all parties and not lead to duplication of effort.