Draft Diligence Summary Memo

Skill: Draft Diligence Summary Memo

1. Subject-matter triage

• Use this skill for acquisition diligence synthesis where the output is an IC-ready memo, not a workstream report.
• Treat the source set as multiple diligence inputs that must be consolidated into one decision document.
• If only one diligence theme exists, say so explicitly; otherwise enumerate the full set of issues before analysis.

2. Failure modes the skill is correcting

• Organizing the memo by workstream instead of by issue severity, which hides the decision-critical picture.
• Listing findings without quantifying their scale against the deal, the diligence figures, or the relevant operational threshold.
• Omitting the downstream consequence of a finding, so the committee cannot see why it matters.
• Failing to cross-link findings to the governing document, schedule, license, covenant, or diligence exhibit that drives the risk.
• Treating structural defects as mere monitoring items when they require a covenant, closing condition, or specific indemnity.
• Presenting adjusted EBITDA and valuation in a way that obscures the difference between management-reported and QoE-adjusted economics.
• Stating legal or regulatory risk conclusions without naming the controlling authority or document basis.
• Ending with diagnosis only, without concrete action items tied to a responsible role and timing.
• Drafting a memo that is descriptive rather than investment-committee-ready.

3. Legal frameworks / domain conventions that apply

• IC-ready diligence memos typically include a transaction overview, valuation bridge, financing summary, severity-ranked issues, mitigation recommendations, and an overall recommendation.
• Implied enterprise multiple should be shown at both management EBITDA and QoE-adjusted EBITDA, with the adjustment bridge made explicit enough to show the turn differential.
• Seller-reported EBITDA should be tested for normalization issues, including owner compensation, non-recurring items, and any add-backs that are not supported by the source materials.
• Change-of-control, assignment, consent, exclusivity, termination, and similar provisions can create closing risk if the target depends on the affected contract or license.
• Missing employment, IP assignment, regulatory, tax, litigation, or similar foundational documents may require pre-closing covenants, closing conditions, or a targeted indemnity rather than a simple risk note.
• For legal conclusions, cite the controlling authority or document basis that supports the proposition, using the source materials where available and recognized authorities where needed.

4. Analytical scaffolds

• Start with a short transaction overview: parties, deal structure, consideration framework, financing mix, rollover if any, and the headline valuation context.
• Build the valuation bridge from management EBITDA to QoE-adjusted EBITDA by itemizing each adjustment and stating the resulting valuation implication.
• Organize issues in ordinal severity tiers, defined once and applied consistently:
  • Critical: can impair closing, threaten license to operate, or create immediate transaction break risk.
  • Material: meaningfully affects valuation, integration, enforceability, or post-close risk allocation.
  • Monitor: important but not deal-shaping absent further facts or escalation.
• For every issue, complete the triad:
  • quantify the issue against a deal figure, threshold, exposure, or other source-based measure;
  • cross-reference the related clause, exhibit, schedule, license, agreement, or diligence input;
  • state the practical consequence for the buyer.
• For every Critical or Material item, add a mitigation path, such as price adjustment, specific indemnity, escrow, closing condition, consent, waiver, representation update, or RWI diligence check.
• When an issue implicates a closing dependency, separate what can be cured pre-signing, what must be delivered at closing, and what can be monitored post-close.
• If the source set includes more than one party, contract, license, site, claim, or period, enumerate the full set first and then analyze each item; do not compress distinct risks into a single blended observation.
• Use source-document terminology for roles, thresholds, and timing where available; otherwise use standard transaction language and make the timing anchor relative to signing, signing-to-closing, or closing.

5. Vertical / structural / temporal relationships

• Trace each issue upward from the underlying document or diligence exhibit to the transaction implication, then downward to the mitigation step.
• Distinguish pre-signing cleanup, signing-to-closing deliverables, and post-closing monitoring so the committee can see when the risk is actually controlled.
• Where a deficiency depends on future consent or waiver, state whether the risk is contingent, probable, or immediate based on the document path and transaction timing.
• If a license, contract, permit, or other right sits at the center of the business model, explain whether the risk is localized or enterprise-wide.
• Keep the memo decision-oriented: facts first, then implication, then action.

6. Output structure conventions

• Write an IC-ready diligence summary memo, not a file-by-file diligence log.
• Use conventional memo sections such as:
  • Transaction Overview
  • Valuation Bridge / Implied Multiples
  • Financing and Sources of Funds
  • Key Diligence Findings by Severity
  • Mitigation / Deal Protections
  • Recommended Pre-Closing Covenants and Closing Conditions
  • Overall Recommendation
• Present the severity tiers explicitly at the start of the issues section and use them consistently for every item.
• Include a concise table for the valuation bridge and another for the issue summary if the source set supports tabular presentation.
• For each issue entry, state: severity, issue, scale or magnitude, document basis or cross-reference, consequence, and recommended protection.
• Do not bury critical items inside a narrative paragraph; surface them where the committee will look first.
• End with an explicit Recommended Actions block that names the action, the responsible role, and the timing anchor.
• Keep the memo ready for direct conversion to a .docx investment committee deliverable.