Successful merger and acquisition (M&A) deals involve meticulous research. However, not everyone is good at commercial due diligence. Deloitte report highlights that about 46% of M&A fail because of improper target identification, inaccurate valuations, and subpar commercial due diligence.

How can one improve their chances of a successful investment? The solutions include sound due diligence for M&A framework, an easy-to-follow commercial due diligence checklist, and the right software. 

Keep reading to explore what commercial due diligence involves, a step-by-step framework, and a practical checklist to ensure all critical aspects are covered.

What is commercial due diligence?

Commercial due diligence (CDD) analyzes a company’s internal and external operations, value, and growth potential for M&A. CDD goes beyond reviewing the financial health — it covers all facets of the business, including its competitors and the market itself.

The commercial due diligence should answer questions like:

  • What is the company’s place in the market?
  • How can the deal increase our company’s value?
  • What potential problems and risks do we face?
  • Is the merger or acquisition a viable investment, considering potential benefits and risks?

Answering these questions requires thorough research of the acquisition target. The process can be tedious, lengthy, and even disruptive for both parties. So, how do you make a commercial due diligence process as quick and thorough as possible?

Due diligence process framework

Bain’s 2025 M&A Trends report highlights that the M&A market has seen a slight growth in 2025, manifesting a return to the pre-pandemic level. However, due to the constantly evolving political and macroeconomic situation, the dealmakers are changing their processes to adapt to regulatory intricacies, growing interest rates, and other new realities.

Taking this into account, commercial due diligence goes deeper into regulatory risks, compliance frameworks, and potential deal-blocking issues to avoid costly delays or failures. You can bring order into this process with a proven commercial due diligence framework:

  • Preparation. Both parties (buyer and seller) should sign a non-disclosure agreement (NDA) and a letter of intent. Next, the buyer should assemble a due diligence team or hire a third-party agency to do the heavy work. 
  • Planning. Parties agree on the reasonable scope of data for disclosure and set timeframes. The seller then prepares the documentation for review.
  • External research. The buyers study the target company’s industry and market, leading competitors, and customer profiles.
  • Internal research. The buyer’s team reviews the seller’s business model, available assets, performance indicators, and organizational documents. 

The team doing the in-depth analysis documents the due diligence results and compiles a report. The final commercial due diligence report should cover the benefits and drawbacks of the potential deal.

For those interested in commercial due diligence, we have prepared a comprehensive commercial due diligence checklist that highlights the key documents needed to conduct a thorough check.

Checklist for commercial due diligence 

This commercial due diligence checklist helps the prospective buyer organize the research or analyze the report done by a third party. As a seller, you’ll know what documents to prepare in advance to save time. Here are the core inquiry items for the commercial due diligence report:

1. General information

The general information section covers the target company’s history and key operations.

Why it matters: these insights help to understand corporate structure, ownership, USP, and value drivers. Based on this data, potential buyers can see if the target company aligns with their strategic goals and set the stage for more in-depth research.

Points of interest:

  • Company’s profile (values, business mission, vision, and message)
  • Executive summary (market analysis, business plan, strategic foundations)
  • Business locations and jurisdictions where it’s licensed to operate
  • Overview of balance sheets, schedule of expenses, revenue margins, and projected profits
  • Ownership (documents regarding directors, officers, and shareholders, their agreements, and rights in the company)
  • Reincorporation and restructuring documents
  • Amendments and corporate bylaws
  • The company’s unique selling propositions (USP)
  • Value drivers for the M&A (expanding the market reach, cost-savings, personnel or technologies acquisition)

2. Market overview

Before proceeding with a merger, use this market due diligence checklist to analyze the industry, market dynamics, consumer trends, and current or potential competitors.

Why it matters: This part of the commercial due diligence checklist provides insights into the market position of the target company to evaluate the competitive landscape and future opportunities.

Points of interest:

  • Market size and segments
  • Market segment-specific trends, demand, conditions, and threats
  • Historical and projected market direction
  • Main drivers for the market growth
  • Barriers to entry
  • Economic and political risks in the marketplace
  • Major competitors (profiles, USPs, customer base)

3. Operations

Operational research examines the company’s business processes and operating model, including sales, marketing, and the supply chain.

Why it matters: Understanding the operational processes is crucial to identifying the efficiency of the target company and seeing what areas need improvement. It also helps estimate future costs, needed investments, or possible synergies post-acquisition.

Points of interest:

  • Key systems and processes (both internal and outsourced)
  • List of products and services (already sold and those in development)
  • Marketing and sales procedures
  • Supply chain processes (main suppliers, creditors, distributors, value-added dealers, and resellers)
  • Customer analysis (primary demographics, segments, churn rate, satisfaction rate, buying power, margin cost for acquiring a customer, lifetime value, and net promoter scores)
  • Summary of warranty claims and complaints
  • Key performance indicators
  • Which processes (manufacturing, customer service, analytics) are automated
  • Use of AI tools (proprietary, third-party, or non-existent)
  • Adherence to the EU AI Act, the U.S. AI Executive Order, or other local laws
  • Roadmap for future tech investments (or lack thereof)
  • Tech infrastructure scalability (Can current systems handle 2x volume post-acquisition?)

4. Human resources

This section of the commercial due diligence checklist covers all the information regarding the number of employees, policies, benefits, and compensation plans.

Why it matters: People are the backbone of any business. It is important to know if key staff will stay, whether there are culture fit issues, or if the acquirer is inheriting any HR liabilities.

Points of interest:

  • Employee and staff development overview
  • Organizational charts
  • Performance assessment (competencies, capabilities, and skillsets)
  • Vetting and onboarding process
  • Payroll, labor, and employment documents
  • Wage, reimbursement, and pensions
  • Company culture and integration risks
  • Retention of key staff
  • Turnover rates by department (especially R&D/sales)
  • Internal communication practices (survey data if available)
  • Employee engagement data
  • Active harassment/discrimination lawsuits
  • Glassdoor/Indeed ratings (last 6 months)

5. ESG (environmental, social, governance) сonsiderations

ESG considerations are non-financial factors that evaluate the target company’s impact on the environment, society, and leadership. These metrics help potential buyers assess long-term risks and ethical alignment.

Why it matters: Regulators and investors now care about sustainability and cultural impact. If the target company dumps waste illegally or has no diversity policy, the potential risks include fines or reputation damage post-deal.

Points of interest:

  • ESG policies and metrics
  • Environmental impact and risks
  • DEI programs and labor practices
  • Corporate governance structure
  • Responsible sourcing and supply chain practices
  • Board diversity and independence
  • Whistleblower policies and ethics hotlines
  • Community engagement and philanthropic initiatives

6. Assets

This section includes the target company’s tangible assets, including real estate and leased property. The commercial due diligence should also examine the IT infrastructure and assess how it integrates into the buyer’s systems.

Why it matters: The company’s assets can affect its value and determine future CAPEX (capital expenditure). The buyer needs to know what they’re getting and if it aligns with their operational and technical setup.

Points of interest:

  • Company-owned and leased properties
  • Inventory documentation (item descriptions, costs, policies for storage maintenance)
  • Software and hardware used by the company (third-party, proprietary, and customized IT systems)
  • System age and usage level
  • Software licensing and IT outsourcing agreements
  • Policies for IT operations, cybersecurity, and disaster recovery
  • Details of data breaches and other security incidents

7. Legal matters

The research should look into the company’s terms and conditions for liabilities and possible regulatory and compliance issues.

Why it matters: Legal surprises can ruin a deal. You need to know if the company has pending lawsuits, regulatory risks, or potential liabilities that could create financial or reputational harm.

Points of interest:

  • Compliance policies and standards of conduct
  • Licenses (governmental licenses, consents, permits, and franchise agreements)
  • Previous and current governmental investigations
  • Pending litigation
  • Financing agreements, loans, and credit lines
  • Potential antitrust problems
  • Court orders, judgments, injunctions, decrees, and settlements
  • Audit results and correspondence with auditors
  • Material reports to government entities

8. Cybersecurity commercial due diligence

This section of the commercial due diligence report highlights whether the target company is secure and what measures it utilizes to protect its confidential information, assets, and customer information from cyber threats.

Why it matters: Data breaches and weak cybersecurity can cause serious financial and legal consequences. This section helps evaluate how well-protected the company’s digital assets are.

Points of interest:

  • Security policies and frameworks (e.g., ISO 27001, NIST)
  • Cyber audit and penetration test results
  • Incident response and disaster recovery plans
  • History of breaches and mitigation actions
  • Data privacy compliance (GDPR, CCPA, UK DPA)

9. Accounting and finances

Accounting is the most tedious but critical part of the commercial due diligence checklist. It includes the analysis of the financial performance, revenue sustainability, and potential tax issues you may inherit.

Why it matters: Before finalizing the deal, buyers must verify that the business is financially healthy and transparent. This information provides insights into the target company’s profitability, cash flow, debt levels, and whether there are any hidden financial risks.

Points of interest:

  • Primary financial ratios (quick profit, gross profit, break-even, net profit, return on capital employed (ROCE), stock turnover)
  • Tax returns for the last three years (local and foreign income, sales, excise, and employment filing taxes)
  • Annual and quarterly financial statements (both audited and unaudited) for the last three years
  • Tax settlements and liens
  • Past revisions (internal and external)
  • Financial projections
  • Corporate governance and risk management policies
  • General ledger (equity and debt financing documents)

This list is by no means exhaustive, but it’s a good place to start. You need to customize your commercial due diligence process for specific markets and companies. And with so many documents to go through, you need the tools to smooth out the process.

Enhance due diligence with a virtual data room

Even the best due diligence framework and the most detailed checklist for acquisition of a private company won’t make up for poor communication, complex management, and poorly organized data. Thankfully, you can eliminate these problems with data rooms.

A virtual data room (VDR) is a secure cloud repository for corporate documents and sensitive information. 

However, VDRs are not like regular file-sharing services (Google Drive or Dropbox). Instead, data rooms are business-grade solutions with features designed for complex transactions. Their benefits include:

  • Robust security. VDRs adhere to international security standards (ISO 27001, SOC2, GDPR) and store your data on private servers managed by experienced personnel. Additionally, this software uses military-grade encryption and advanced authentication mechanisms.
  • Communication tools. Advanced communication features allow you to leave messages, comments, and annotations for files to get prompt answers.
  • Accessibility. Every authorized user can access the documents online and offline from anywhere. It is easy to navigate through the user-friendly interface and find specific documents with a full-text search feature.

VDRs can simplify business transactions by enabling users to examine documents remotely in a very secure setting. These tools are already assisting thousands of companies worldwide, including those in the UK, to enhance their due diligence processes, making it easier to follow the due diligence checklist that UK and global businesses rely on.

Bottom line

The commercial due diligence process is an essential stage of a successful M&A deal. This stage allows both sellers and buyers to accurately measure the target company’s value and meet the expected return on investment. 

The commercial due diligence checklist shared above is created to help investors and sellers streamline merger and acquisition due diligence, reduce risks, and save time. Additionally, it is advisable to use enterprise-grade virtual data room solutions to refine and streamline the commercial due diligence process.