Overview
Structured diligence is the difference between a successful acquisition and a value-destroying one. This checklist covers the four primary diligence streams for digital asset transactions: pre-LOI screening, commercial diligence, technical diligence, and legal diligence. Each section is designed to surface the issues that most commonly affect post-close performance.
Pre-LOI Checklist
| Item | Purpose |
|---|
| 3 years P&L and balance sheet | Assess financial trajectory and margin structure. |
| MRR/ARR breakdown by product and cohort | Understand revenue composition and growth quality. |
| Customer count and churn data | Validate retention claims. |
| Revenue by channel and geography | Identify concentration risks early. |
| Traffic analytics (12 months) | Assess traffic quality and platform dependency. |
| Cap table and ownership structure | Confirm clean title and identify any encumbrances. |
Commercial Diligence
| Item | Purpose |
|---|
| Total Addressable Market (TAM) validation | Confirm the market is large enough to support growth projections. |
| Competitive positioning analysis | Identify defensibility and moat. |
| Customer retention cohort analysis | Validate long-term revenue quality. |
| Customer interviews (3-5 reference calls) | Confirm product value and switching costs. |
| Pricing history and sensitivity | Assess pricing power and future expansion potential. |
Technical Diligence
| Item | Purpose |
|---|
| Codebase review and architecture assessment | Identify technical debt and scalability constraints. |
| Data security and compliance audit | Assess GDPR, CCPA, and data breach risk. |
| Third-party integrations and API dependencies | Identify platform concentration risk in the tech stack. |
| Infrastructure costs and scalability | Understand the unit economics of growth. |
| Disaster recovery and uptime history | Assess operational resilience. |
Legal Diligence
| Item | Purpose |
|---|
| IP ownership and assignment chain | Confirm clean title to all intellectual property. |
| Key customer and supplier contracts | Identify change-of-control provisions and termination rights. |
| Employment agreements and contractor status | Assess employment liabilities and key person risk. |
| Regulatory licences and compliance status | Confirm all required licences are held and current. |
| Litigation history and outstanding claims | Identify contingent liabilities. |
| Data privacy compliance documentation | Assess GDPR/CCPA exposure. |
Disclaimer
This checklist is a general guide and does not constitute legal or financial advice. Specific diligence requirements vary by transaction. Always engage qualified legal and financial professionals.
