[Christopher]

Hi all,

Curious to hear people’s views on this: when you’re looking at smaller acquisitions (less than $3 million in enterprise value), what’s your bare minimum due diligence checklist?

I know best practice usually includes financial, legal, commercial, operational, tax, etc. But for leaner or more opportunistic deals (especially when you’re buying from a founder, not a PE firm), what’s the threshold where you say: “This is enough to move forward”?

[Fadi Aabidi]

Thank you for this very relevant and consequential question. Having been through similar scenarios myself, I would at least make sure to:
1. Conduct a financial sanity check by verifying 3 years of bank statements, tax filings, key customer invoices, and major expenses to confirm true revenue, margins, and cash flow.
2. Analyze customer concentration & continuity by identifying top customers, contracts, and churn risk.
3. Identify key dependencies through assessing company reliance on the founder, suppliers, or one product/channel.
4. Verify legal title by confirming ownership of assets/IP, no pending lawsuits or debts.
5. Assess operational viability through ensuring that the business can run post-transition with existing staff, systems, and licenses.
If those five boxes check out to a satisfactory degree, that would be enough to move forward for me.

[Author]

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