AI BIZ GURU – M&A – Due Diligence

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AI BIZ GURU – M&A – Due Diligence 

* Introduction

A Due Diligence process is essential for evaluating a company’s financial health, operational efficiency, and market position. This structured framework enables businesses, investors, and stakeholders to assess investment decisions, acquisitions, or internal improvements comprehensively.

* Suggested Files for Due Diligence

To ensure a comprehensive due diligence process, businesses should prepare and review the following documents:

1. Financial Review

• Audited financial statements (last 3–5 years) 

• Tax returns and filings

• Profit and loss statements

• Cash flow statements

• Balance sheets

• Accounts payable and receivable reports

• Bank statements

   

2. Legal & Regulatory Compliance

• Articles of incorporation & business licenses

• Shareholder agreements & corporate bylaws

• Contracts with clients, suppliers, and vendors

• Non-disclosure agreements (NDAs)

• Ongoing or past litigation records

• Regulatory compliance reports

• Patents, trademarks, and intellectual property documentation

   

3. Operational Assessment

• Organizational structure chart

• Supply chain agreements

• Inventory and asset list

• Key operational policies and procedures

• Vendor and supplier contracts

• Business continuity and disaster recovery plans

   

4. Market & Competitive Analysis

• Business plans and growth strategies

• Market research reports

• Customer acquisition and retention data

• Competitor benchmarking analysis

• Sales reports and projections

   

5. Technology & Cybersecurity

• IT infrastructure and system documentation

• Data security policies and audits

• Software licensing agreements

• Intellectual property and proprietary technology details

• Cybersecurity risk assessment reports

   

6. Risk Management & Insurance

• Risk assessment reports

• Insurance policies (liability, property, cybersecurity, etc.)

• Incident reports and past claims

• Compliance risk assessments

   

7. Human Resources & Corporate Culture

• Employee contracts and offer letters

• Benefits and compensation structure

• HR policies and procedures

• Employee performance reviews and retention data

• Leadership and succession planning reports

   

* The 7 Key Elements for Due Diligence

Financial Review

Analyze financial statements, cash flow, profitability, and liabilities.

Verify tax compliance and outstanding debts.

Legal & Regulatory Compliance

Assess corporate structure, contracts, and legal disputes.

Ensure compliance with industry regulations and local laws.

Operational Assessment

Evaluate supply chains, workflow efficiency, and resource allocation.

Identify potential operational risks and inefficiencies.

Market & Competitive Analysis

Assess market positioning, customer base, and industry trends.

Benchmark against competitors and growth potential.

Technology & Cybersecurity

Evaluate IT infrastructure, data protection policies, and cybersecurity risks.

Assess software, intellectual property, and digital assets.

Risk Management & Insurance

Identify financial, operational, and reputational risks.

Review existing insurance policies and risk mitigation strategies.

Human Resources & Corporate Culture

Review employee contracts, benefits, and workforce stability.

Assess leadership, organizational culture, and succession planning.

* Step-by-Step Due Diligence Process

Step 1: Select the Due Diligence Scope

Choose the areas of focus for the due diligence:

Financial Due Diligence – Assess financial statements, valuation, and cash flow.

Operational Due Diligence – Evaluate business processes, efficiency, and scalability.

Market & Competitive Due Diligence – Analyze industry position, competitors, and market trends.

Legal & Compliance Due Diligence – Verify regulatory adherence and contractual obligations.

Technology & Intellectual Property (IP) Due Diligence – Assess technology stack, patents, and innovation capabilities.

Step 2: Choose Creation or Validation

• Creation – Generate a new due diligence report from scratch based on the provided data.

• Validation – Review and verify an existing due diligence report for accuracy and completeness.

Step 3: Upload Required Files

To conduct due diligence effectively, the following documents must be provided based on the selected scope:

Financial Due Diligence

• Profit & Loss Statements (last 3-5 years)

• Balance Sheets

• Cash Flow Statements

• Business Valuation Reports

• Tax Returns & Audit Reports

Operational Due Diligence

• Business Process Documentation

• Organizational Structure & Key Roles

• Supplier & Vendor Contracts

• Inventory & Asset Management Reports

• Risk Assessments & Contingency Plans

Market & Competitive Due Diligence

• Industry & Market Analysis Reports

• Customer Demographics & Market Segmentation

• Competitor Benchmarking & SWOT Analysis

• Sales & Marketing Strategies

• Pricing Strategies & Revenue Models

Legal & Compliance Due Diligence

• Corporate Structure & Legal Entity Documents

• Regulatory Compliance Certificates

• Litigation History & Pending Lawsuits

• Intellectual Property (Patents, Trademarks, Copyrights)

• Key Contracts & Agreements (Partnerships, NDAs, Client Agreements)

Technology & IP Due Diligence

• IT Infrastructure & Security Policies

• Software Licenses & Technology Stack

• R&D Investments & Innovation Pipeline

• Data Privacy & Cybersecurity Compliance

• Proprietary Technology & Competitive Advantage

Step 4: Provide Additional Comments

• Specify any key concerns or focus areas for the due diligence process.

• Highlight risks, assumptions, or specific points requiring verification.

• Provide supplementary notes or clarifications for the evaluation team.

Step 5: AI BIZ GURU Due Diligence Processing

• AI-driven analysis of financials, risks, and market trends.

• Identification of potential red flags and business vulnerabilities.

• Benchmarking against industry standards and valuation models.

• Generating a Due Diligence Report summarizing key findings.

Step 6: Report Generation & Recommendations

• For Creation: A structured due diligence report with insights and action items is delivered.

• For Validation: A review summary is provided, including inconsistencies, risks, and areas for improvement.

• The user is notified when the process is complete, with options for adjustments or further investigation.

Closing & Next Steps

A well-executed due diligence process ensures informed decision-making, minimizes risk, and validates business assumptions. AI BIZ GURU provides data-driven insights to optimize investment strategies and operational efficiencies.

We invite investors, business owners, and M&A teams to leverage this structured due diligence process for more innovative, more secure business transactions.

Final Deliverable: Due Diligence Report

A comprehensive report including: 

✔ Executive Summary 

✔ Key Findings & Risk Assessment 

✔ Financial Health & Valuation Insights 

✔ Operational & Market Position Analysis 

✔ Legal & Compliance Status 

✔ Strategic Recommendations & Next Steps

Sample Report of M&A Due Diligence based on the AI BIZ GURU framework 

AI BIZ GURU – M&A Due Diligence Report

Client: New Horizon Capital
Target Company: GreenTech Innovations Inc.
Date: April 2025
Report Type: Creation – Full Scope Due Diligence

Executive Summary

GreenTech Innovations Inc. is a mid-sized renewable energy solutions provider in North America. This report covers a comprehensive due diligence review across financial, legal, operational, market, technological, risk, and HR domains. The analysis highlights key strengths in innovation and market potential alongside notable risks in regulatory exposure and cybersecurity resilience.

1. Financial Review

Key Findings:

• Revenue CAGR of 12% over the past 3 year 

• EBITDA margin stable at ~18%

• Outstanding debt of $2.4M with favorable interest terms

• Tax filings are consistent, with minor discrepancies in Q2 2023 VAT reports.

• Valuation based on DCF suggests a fair value range of $52M–$58M. 

Red Flags:

• Cash flow volatility due to delayed payments from large public-sector clients

• Heavy reliance on a single supplier for a key component

2. Legal & Regulatory Compliance

Key Findings:

• All corporate filings, licenses, and contracts are current and valid

• Ongoing litigation with a former contractor ($500K claim) unlikely to result in material loss

• IP portfolio includes three registered patents and one pending application

Red Flags:

• Some NDAs and partnership agreements lack updated renewal clauses.

   

• Data privacy compliance in European operations needs formal documentation updates for GDPR.

   

3. Operational Assessment

Key Findings:

• Lean operations model with clear SOPs and KPIs

• Strong supplier relationships with diversified sourcing (except one critical input)

• 2-week inventory turnover rate aligns with industry best practices

Red Flags:

• Outdated business continuity plan last reviewed in 2021

• No documented ESG (Environmental, Social, Governance) strategy

   

4. Market & Competitive Analysis

Key Findings:

• Strong brand presence in renewable B2B market, especially in solar microgrid systems

• 7% market share regionally, with 15% YoY client retention growth

• Competitive pricing and strong service differentiation

Red Flags:

• Customer churn in the residential segment due to high competition

• Overestimation of market expansion in Latin America in internal forecasts

   

5. Technology & Cybersecurity

Key Findings:

• Proprietary smart grid software licensed to 3 major utility clients

• Investment in R&D accounts for 8% of annual budget

• 2024 cybersecurity audit passed with no major vulnerabilities

Red Flags:

• Weak multi-factor authentication practices for internal access

• Data recovery drills have not been conducted in the past 12 months

   

6. Risk Management & Insurance

Key Findings:

• General liability and cyber insurance policies are active and renewed

• Risk assessment reports exist for key operational areas

Red Flags:

• No recent risk simulation exercises or scenario planning

• High dependency on U.S. federal energy grants poses funding volatility risks.

   

7. Human Resources & Corporate Culture

Key Findings:

• 85% employee retention rate, with strong leadership bench

• Performance reviews and bonuses tied to ESG and innovation metrics

• Positive Glassdoor/Indeed ratings (avg. 4.3/5)

Red Flags:

• No formal succession plan beyond C-level executives

• Lack of standardized onboarding process across departments

   

Risk Assessment Summary

Strategic Recommendations

• Diversify the supplier base and establish secondary sources 

• Formalize GDPR compliance documentation for European business.

• Upgrade cybersecurity protocols and conduct recovery drills.

• Refresh business continuity and ESG strategy documentation.

• Define clear succession plans and standardize HR onboarding

   

Next Steps

• Initiate focused legal review of contracts flagged for renewal.

• Engage cybersecurity consultant for system hardening.

• Conduct site visits to verify operational resilience.

• Schedule leadership interview for cultural alignment insights

   

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