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1. Financial
2. Legal
3. Tax
4. Commercial
5. HR
6. Technical
7. ESG

Financial diligence involves a detailed review of the company’s true financial performance and sustainability. It includes:

1. Quality of earnings (normalized EBITDA)
2. Revenue analysis (recurring vs one-time)
3. Profit margins and cost structure
4. Debt and liabilities
5. Working capital requirements
6. Cash flow consistency

This helps buyers verify actual profitability and financial health.

Legal diligence focuses on verifying the company’s legal standing and risk exposure. It includes:

1. Review of contracts (customers, suppliers, leases)
2. Ownership structure and shareholding
3. Ongoing or past litigation
4. Regulatory compliance
5. Intellectual property (trademarks, patents, copyrights)

This ensures there are no hidden legal risks.

Tax diligence evaluates the company’s tax compliance and potential liabilities. It includes:

1. Review of past tax filings (GST, income tax, etc.)
2. Outstanding tax liabilities or disputes
3. Tax notices or assessments
4. Structure efficiency and tax planning

This helps identify tax risks and future exposures.

Commercial diligence assesses the market viability and business potential. It includes:

1. Industry size and growth potential
2. Competitive landscape
3. Customer behavior and demand trends
4. Revenue drivers and scalability
5. Positioning and differentiation

This helps buyers evaluate future growth opportunities.

HR diligence evaluates the company’s people, structure, and workforce risks. It includes:

1. Employee contracts and compliance
2. Key employee dependency
3. Compensation and benefits structure
4. Attrition and retention risks
5. Pending disputes or liabilities

This ensures operational continuity and team stability post-acquisition.

4–10 weeks typically.

Fraud, hidden liabilities, overstated revenue, legal disputes.

Yes, this is mandatory for a smooth and credible deal process. A well-prepared data room should include:

1. Financials: Audited statements, MIS, projections
2. Legal documents: Incorporation papers, contracts, licenses
3. Tax records: Filings, returns, notices
4. Operational data: Customer details, supplier agreements
5. HR records: Employee contracts, org structure
6. Assets & IP: Property, machinery, trademarks

for due diligence