This is a practical roadmap that helps you conduct due diligence and understand the value of the deal and the associated risks. The goal is to reach a purchasing decision based on realistic figures and actionable integration plans.

## 1) Defining Objectives and Deal Scope

- Determine what you want to achieve from the acquisition (revenue growth, access to a new market, technical/software assets, operational integration).

- Set deal criteria: Maximum purchase price, expected return, time required for integration, risk limits.

- Decide the scope of analysis: Entire company or specific assets? Any product lines? Does it include debts and obligations?

## 2) Financial Due Diligence

- Data request for 3–5 years: Revenues, gross margin, EBITDA, net profit, free cash flows.

- Working capital analysis: Days inventory, days receivables, days payables.

- Examination of debts and obligations: Leverage, credit lines, commitments, potential liabilities (returns, payables, mandatory contracts).

- Quality of Earnings: Are earnings recurring or seasonal? Presence of any non-recurring or unusual items?

- Tax examination and financial compliance: Due taxes, tax compensations, potential tax disputes.

Detailed Example: You care about seeing EBITDA and profit margins, comparing cash flows with net profit to understand profit quality.

## 3) Legal Due Diligence

- Ownership and core rights: Intellectual property contracts, licenses, core contracts with customers and suppliers.

- Debts and legal obligations: Open litigations, contractual commitments, collective labor agreements, termination conditions.

- Regulatory Compliance: Business licenses, customer data collection, data protection, environmental and health compliance issues.

- Taxes and Regulatory Issues: Review of tax issues, risks of future tax disputes.

## 4) Commercial Due Diligence

- Market Model and Opportunity: Potential market size, growth rate, trends, and threats.

- Customer dependency and risks: Higher share of a single customer, presence of diversification in the portfolio.

- Distribution and Sales Channels: Degree of reliance on a single channel, payment terms, and promotional materials.

- Competition and Competitive Advantage: What differentiates the company? Intellectual property protection? Long-term contracts?

## 5) Operational & IT Due Diligence

- Core Operations: Supply chain, inventory management, production, service quality.

- Technology and Systems: Presence of ERP/CRM systems, service continuity, data security, maintenance and upgrade costs.

- Human Resources: Company culture, retention of key staff, union agreements, salaries, and compensation.

- Cost Efficiency: Opportunities for efficiency improvement, rationalizing administrative expenses, and integration opportunities between systems.

## 6) Tax & Environmental Due Diligence

- Potential Tax Risks: Presence of tax differences, collection of overdue taxes, available tax options.

- Environmental and health obligations: Potential environmental risks, regulatory obligations, costs associated with compliance.

## 7) Valuation & Scenarios

- Use more than one approach to determine the value of the contract:

- Discounted Cash Flow (DCF) analysis based on revenue, growth, cost, and tax assumptions.

- Comparisons with similar companies (multiples like EBITDA/EV, sales/EV).

- Asset-based valuation if there are high-value intangible assets.

- Conducting Scenarios: Realistic basis, strong portfolio scenario, and pessimistic scenario with merger effects.

- Determine a fair price range and final price limits based on risks and proposed merger.

## 8) Deal Structure & Integration Plan

- Deal Terms: Warranties and obligations, closing periods, refund conditions.

- Commitments and Earn-outs: Examples of achieving financial or operational goals within a specified period.

- Protecting parties: Deposits/guarantee documents, dispute resolution mechanisms, return procedures.

- Merger Plan: Merger objectives, cost management, transfer of key employees, system standardization, merger timeline.