Due diligence request list: The documentation you need

When deciding to bring in a new investor to your SaaS business or sell it outright, the first question you should ask yourself is this: Do I have my house in order? Once you have found the right investor or buyer for your business and successfully negotiated a price and transaction structure that works for both parties, the real fun starts – due diligence. Our due diligence request list gives you an overview of the documentation investors would like to see.

Our article, “Due Diligence: What you need to know,” explains the different aspects of commercial, financial, legal, organizational, and technical due diligence. To ensure a seamless due diligence process for you and your team, having all the documentation an investor or buyer will want to review in order is important. One of the most common reasons transactions are delayed is incomplete documentation from the company.

Update your virtual data room

Our recommendation to all businesses contemplating bringing in investors or planning an exit in the future is to consistently populate a virtual data room (VDR) with the necessary documentation. This ensures you always have an updated VDR, significantly reducing the workload when initiating a due diligence process.

We also suggest that all businesses consider what a new investor or buyer wants to see in a typical investment process and begin compiling these reports to ensure sufficient historical data is available. For instance, many businesses we invest in lack monthly management reports detailing ARR, P&L, Cash, and pipeline developments. Typically, these companies end up spending a substantial amount of time putting this information together during the transaction to provide us with enough insight to perform the necessary analyses. For inspiration on what metrics are essential to track, see our article and webinar on SaaS KPIs. 

What type of documentation is needed?

So, what kind of documentation do you need to compile? Attached to this article you can find a standard due diligence request list to get you started. We typically send this list to potential investments at the start of a transaction process as the starting point for our due diligence. As is customary, we engage third-party advisors to conduct financial, legal, and technical due diligence, resulting in additional requests specific to these workstreams.

Compiling documentation and working with the VDR typically falls on the CFO’s plate. As mentioned earlier, we recommend continuously updating the VDR, even when not actively in a transaction process, to ensure the list is always current.

How to work with the due diligence request list

We have split the DD request list into sections and numbered each document accordingly. When working with this list, we recommend assigning a responsible individual for each section who will update the list as they add each document to the relevant location. If a document is not added, there is space for a comment to detail the reasoning behind this. It is important to note that not all documents on this list will be relevant for all companies. If this is the case, add a comment to explain why.

This list may appear overwhelming initially, which is why we stress the importance of consistently populating the VDR and approaching the task piece by piece. However, this investment of time and effort is well worth it to ensure a smooth process in one of the most critical phases of any transaction – due diligence.