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Search Fund Due Diligence Checklist: 47 Items Organized by Workstream

The complete search fund due diligence checklist — 47 items organized by workstream. Use it as a standalone tracker or run it directly inside your diligence portal.

By SearchWare Team

Due diligence is where search fund acquisitions succeed or fail. Not in negotiation, not at close — in the 60–90 days between signed LOI and the wire transfer. The operators who close deals efficiently are the ones who systematized their diligence process before they needed it.

This checklist is designed for the ETA context: a lean deal team, limited time, and a seller who is often navigating a formal diligence process for the first time. It's organized by workstream — the same structure professional QoE and legal advisors use, and the same structure your diligence portal should present to your seller.

How to Use This Checklist

Two modes:

  1. Standalone tracker: Copy the checklist into your own spreadsheet and customize it by deal. Track status (Pending / Uploaded / Approved) per item, assign owners, add notes.

  2. Inside your diligence portal: In SearchWare, these workstreams map directly to the portal structure. Document requests are tracked per workstream, with status visible to all parties.

The goal is never to get through 47 items for its own sake. The goal is to surface the 5–8 issues that actually affect price, terms, or the decision to proceed.

Workstream 1: Quality of Earnings

QoE is usually the first and most consequential workstream. Even without a full QoE firm, replicate the core analysis yourself.

  1. Historical revenue reconciliation (3–5 years) — agree financials to tax returns
  2. Revenue by customer — identify concentration (>20% = flag, >30% = significant risk)
  3. Customer churn and retention analysis — for recurring revenue models, especially
  4. Gross margin by product/service line — which segments are most profitable?
  5. Add-back analysis — owner compensation, non-recurring items, above-market expenses
  6. Working capital analysis and normalization — define the peg
  7. EBITDA bridge: reported to adjusted — the number that justifies your purchase price
  8. CapEx history — maintenance vs. growth split
  9. Accounts receivable aging — quality and recoverability
  10. Deferred revenue and backlog — quality of forward revenue
  11. Supplier concentration and pricing risk
  12. Cash conversion cycle — how efficiently does the business convert earnings to cash?

SearchWare's deal memos and evidence workflow connects extracted figures to their sources and surfaces questions for further review. Use the pre-QoE observations to prepare requests for your advisor; they are not a replacement for a quality of earnings report.

  1. Corporate structure and ownership — clean cap table? Any side agreements?
  2. Customer contracts — assignment clauses (do they survive a change of control?)
  3. Supplier contracts — same question; renegotiation risk post-close?
  4. Employment agreements and non-competes
  5. IP ownership — software, brands, proprietary processes clearly owned by the entity?
  6. Litigation history — last 5 years, any threatened claims?
  7. Regulatory compliance — licenses, permits, certifications (and transferability)
  8. Environmental liability — for any physical operations
  9. Data privacy compliance — GDPR, CCPA, SOC 2 if relevant
  10. Outstanding litigation or disputes — disclosed and quantified?
  11. Real estate lease — assignment rights, term remaining, options to renew

Workstream 3: Commercial & Customer

  1. Customer interview list — minimum 3–5 key customers; candid conversations
  2. Customer satisfaction data — NPS, CSAT, retention metrics
  3. Pipeline and backlog quality — contracted vs. expected vs. speculative
  4. Sales process documentation — CRM state, cycle length, win rate
  5. Marketing attribution — where do customers come from?
  6. Pricing history — ability to raise prices without churn?
  7. Competitive positioning — from customer perspective, not just management's
  8. Customer concentration reassessment — post-interview, does risk change?
  9. Churn drivers — qualitative analysis; why do customers leave?

Workstream 4: Operations & People

  1. Org chart and key person dependencies — who else could run this business?
  2. Employee count, roles, compensation benchmarking
  3. Key person retention risk — seller transition plan, retention agreements
  4. Operational documentation — SOPs, training materials, process documentation
  5. Technology stack and vendor dependencies — single-vendor dependency?
  6. IT systems inventory — hardware, software, cloud infrastructure
  7. Cybersecurity posture — especially for B2B SaaS or data-sensitive businesses
  8. Facilities and equipment condition

Workstream 5: Financial & Tax

  1. Historical financial statements (3 years; audited if available)
  2. Tax return reconciliation to financial statements
  3. Working capital peg definition and historical range
  4. Net debt calculation — includes all debt-like items, not just term loans
  5. Off-balance sheet liabilities — commitments, contingencies, guarantees
  6. Insurance coverage adequacy — D&O, E&O, general liability, key man
  7. Closing adjustments — escrow mechanics, R&W insurance options

As diligence changes your view of earnings, working capital or financing, revisit the acquisition underwriting. Keep seller claims, buyer adjustments and financing assumptions distinct so you can see why the case changed.

Managing the Diligence Process

The checklist is the starting point. The harder problem is managing the process.

Most searchers default to a shared Google Sheet and a Dropbox folder with a status tracker. This works until you have 15 outstanding document requests across 3 workstreams and the seller's attorney is asking for a status update.

A diligence portal and data room gives invited participants a shared place for workstreams, requests and milestones. In SearchWare, assign a seller request, review its upload and approve it or return it for follow-up. Keep your internal deal documents private until you deliberately share them with the portal.

Review portal availability by plan before setting up your trial. Solo includes one active portal; Pro and above include unlimited portals.

Use the checklist above to organize your diligence requests, or try SearchWare free for 14 days including the Diligence Portal.

The card-free 14-day trial is available to first-time customers who choose a plan in Settings → Billing.

See also: Search Fund Software Guide | How to Write a Search Fund LOI

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