Questions to Ask During an Acquisition as the Deal Team
Questions to ask during an acquisition when you are on the side doing the buying: the board member, the finance lead, the operator who will inherit the business. For a team working out what questions to ask when acquiring a company, the list follows the order a deal runs in, from the case for buying at all, through the financials, the risks and the terms, to the people and the integration plan. Some are for deals that are not a plain purchase: the ones to ask before acquiring a brand, where the name is most of the price, and the ones to ask when merging two companies, where neither side is simply the buyer. The notes say what a solid answer looks like, what a thin one may be covering, or which document to ask for. Sellers can read the list as a preview of what they will be asked. If you work at the company being bought, your questions are different ones, about your role, pay and equity.
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The questions
Each question, and why to ask it
Strategy
What exactly are we buying: the customers, the product, the people or the market position?
Why ask it
Each answer puts the value somewhere different and sends diligence to a different place. A deal bought for its customers stands or falls on contracts and renewals, and one bought for its people on who stays. If the room gives four answers, the price is being set without agreement on what it is for.
Why is the owner selling, and why now?
Why ask it
Retirement, a fund reaching the end of its life and a founder who sees trouble coming all read the same in a sale document. Check the stated reason against what the seller does next: an owner who keeps a stake or stays on believes something different from one who wants all of it in cash at close.
Why are we buying this company rather than building the same capability ourselves?
Why ask it
Building it yourself is the alternative that gives the price something to be measured against. Ask for the estimate of what that would cost and how many years it would take. If nobody has made one, the multiple is resting on the story told about the deal.
Which parts of the price depend on synergies, and who owns delivering each one?
Why ask it
Cost synergies can be checked against headcount and contracts. Revenue synergies usually cannot. A synergy with no named owner and no date is a price increase agreed in advance.
Which two or three assumptions, if wrong, turn this into a loss?
Why ask it
Naming them makes the deal testable afterwards. If the answer is a list of ten, nobody has separated what is load-bearing from what is merely uncertain.
Who inside the target wants this deal, and who does not?
Why ask it
A founder who wants out, a board forcing a sale and a management team that fought the process lead to three very different years after close. When the answer is 'everyone is aligned', ask whether the managers below the top team have been told yet.
What happens to our own business if we do not do this deal?
Why ask it
Often the truthful answer is 'nothing much', and that is worth knowing before the bidding gets competitive. If the answer is that a rival buys it instead, price that threat separately, because fear of someone else's deal is a poor basis for a multiple.
Where does the target really stand in its market, and who says so besides the target?
Why ask it
Market share figures in a sale document rest on the seller's own definition of the market. Ask what the customers who chose a competitor said, and what the target's lost bids have in common.
Who else is bidding, and what does the seller do if we drop out?
Why ask it
A seller with one bidder and a deadline negotiates differently from one running a real auction. You will rarely be told which it is, so watch the behavior: deadlines that move and sudden flexibility on terms suggest the room is emptier than advertised.
Are we buying this company outright or merging two companies into a new one, and does each side describe it the same way?
Why ask it
The label decides more than the press release does. Ask where control will sit afterwards: the chair, the chief executive's job, the head office and the majority of the board. A deal presented as a merger to one workforce and as a purchase to the other has already misled one of them.
If the brand is most of what we are paying for, how much of the sales follow the name and how much follow the founder, the price or one retailer?
Why ask it
Before acquiring a brand, work out what happens to demand when each of those props is taken away. Look at sales made at full price, at repeat orders, and at what buyers say when asked why they chose it. A name that sells only on discount or on its founder's own following is worth less the day the founder is paid out.
Financials
Have the accounts been audited, and do the monthly management numbers tie back to them?
Why ask it
The information pack is usually built from management accounts, which nobody outside the company has tested. Ask for a reconciliation from those to the audited or filed accounts and to the tax returns. Small differences are normal, but a gap nobody can explain line by line is where the rest of the financial diligence should start.
What does the quality of earnings review show about revenue that will not repeat?
Why ask it
This is an outside accountant's rebuild of the profit figure, separating income that recurs from contracts that landed once and from timing that flatters one period. Read the list of costs the seller added back and ask who agreed each one. A seller who resists the review is often protecting the softest numbers.
Which customers account for the largest share of revenue, and do their contracts survive a change of control?
Why ask it
Concentration and change-of-control clauses interact. If the top handful of accounts can terminate at close, you are buying an option on their goodwill, not a book of revenue. Read the clauses themselves and not the seller's summary of them.
How many customers has the target lost in the last three years, and why did each of the big ones leave?
Why ask it
Growth can hide a leak, with new accounts arriving faster than old ones go. Ask for the list by name and size, since losing many small accounts and losing two anchor ones are different problems. Where the reason given is always price, find out who they went to.
How close have the target's past forecasts come to what happened, and how much of next year's is already under contract?
Why ask it
Put the last three budgets beside the actual results before reading the new projection. A team that has missed every year is unlikely to have found its accuracy in the year of the sale, so the signed backlog is the part of the forecast you can lean on.
What do the target's margins look like once its costs sit on our cost base?
Why ask it
Standalone margins move when benefits, salary bands, insurance and compliance costs are restated at acquirer levels. Sellers rarely present this version, and it is the version you will report.
How much working capital does the business need across a full year, and where is the target level set in the agreement?
Why ask it
A seller can chase receivables hard and stretch suppliers in the months before close, then hand over a business that needs cash in its second week. Set the level from a seasonal average and have it checked by whoever will run the business, since they inherit the shortfall.
What debt and debt-like items come with the business, and are they deducted from the price?
Why ask it
Bank loans are the easy part. Deferred revenue, unpaid bonuses, leases, overdue tax and money still owed on the target's own earlier purchases are where buyer and seller disagree. On a deal priced free of cash and debt, every item that lands inside the definition of debt comes off what you pay.
What has the target spent too little on to make the last two years look this good?
Why ask it
Maintenance put off, a hiring freeze, sales roles left unfilled and marketing cut back all lift profit just before a sale. Compare those lines with the years before the sale was planned and add the catch-up to your cost of ownership.
How much does the target spend on advertising and promotions to hold its sales, and what happened the last time that spending was cut?
Why ask it
A brand with real pull keeps most of its customers through a quiet quarter. Ask for sales by month beside marketing spend, and for the split between paid and unpaid traffic if it sells online. Where the two lines rise and fall together, the price is buying a marketing budget as much as a name.
Which valuation method produced this price, and what does a second method say?
Why ask it
A price that holds up under only one method, usually the one with the kindest comparables, deserves suspicion. When a multiple of earnings and a cash flow model land far apart, the gap shows which assumption is carrying the number.
How are we paying for this, and what does the financing do to our own balance sheet?
Why ask it
Cash on hand, new borrowing and issuing shares each cost something different and each limits what you can do for the next few years. Where lenders are involved, ask which covenant the combined business would sit closest to in a bad year, and run that case before committing.
Risks
What liabilities are we taking on with this business, and which of them has nobody put a number on?
Why ask it
Tax owed for past years, warranty claims, environmental clean-up and pension shortfalls are the usual list. The ones to worry about are known but unmeasured, because they tend to be handled with a promise in the contract when they should be changing the price.
Is anyone suing the target, investigating it or threatening to?
Why ask it
Filed cases are the easy part to find. Ask for the letters as well: complaints from customers, claims from former staff, questions from a regulator or tax office that have not turned into anything yet. Then have your lawyers say which of them the seller should stay responsible for after close.
Who owns the shares, and does everyone who has to sign actually want to sell?
Why ask it
Minority holders, a former co-founder, option holders and a lender with a veto can each hold up a close or ask a better price for themselves. Get the full ownership table and the shareholder agreement early, because equity promised informally to staff tends to surface in the final week.
Was any of the target's intellectual property built by contractors or on open source components?
Why ask it
Work done without a written assignment, and code carrying copyleft terms, may not pass to you cleanly. It is an easy gap to miss in a smaller target and it tends to surface late, so ask for the contractor agreements and an open source audit of the code at the start.
Who holds the trademarks, domain names and social accounts, and in which countries and product classes is the name registered?
Why ask it
In a founder-led business these can sit with one person, an old agency or a former partner, and not with the company you are buying. Ask for the registration certificates and a list of every account with its owner. Protection is granted country by country, so have a trademark lawyer check each market you plan to sell in.
Has the target licensed its name or granted exclusive distribution to anyone, and how can those agreements be ended?
Why ask it
A licensee or an exclusive distributor keeps its rights when the owner changes. Read the territory, the term, the quality controls and the notice period, because a buyer who planned to take a region back in-house may find it tied up until the term runs out.
Which supplier agreements, leases, loans and licenses need someone else's consent before they pass to us?
Why ask it
Customers get the attention, but a landlord, a software vendor or a bank can hold the same card. Each consent is a negotiation with a party who knows you are on a deadline, so list them at the start and decide which ones are conditions of closing.
Is there one supplier, platform or partner the target could not operate without?
Why ask it
Reliance on a single source is as dangerous as reliance on a single customer and far less visible in the accounts. Find out how long the arrangement has left to run, whether the price is fixed, and whether that partner also serves your competitors.
Once the two companies are one, do any of their contracts collide, such as exclusive deals with rival suppliers or pricing promises to competing customers?
Why ask it
A promise of exclusivity made by one side can be broken the moment the other side's contracts come under the same roof. Have both contract lists searched for exclusivity, non-compete and most-favored pricing clauses, and get counsel's view on which need renegotiating before close.
Which regulatory approvals or filings does this deal trigger, and how long will clearance realistically take?
Why ask it
Which approvals apply depends on the countries, the sector and the size of the two businesses, so this one goes to counsel early. The timing changes the deal as well as the paperwork: a long review means months in which the two companies cannot be run as one and key employees are free to leave.
Has the target had a security breach or a data complaint, and how did it collect the customer data it holds?
Why ask it
Personal data gathered without the right consent may not be usable for the purpose you are buying it for, and the rules differ by country, so take advice for each place the target has customers. A company that reports no incidents and keeps no log may simply not have been looking.
When can we speak to the target's biggest customers ourselves, and what happens if the seller says no?
Why ask it
Sellers tend to hold these calls back until late, for the fair reason that an unsettled customer hurts both sides. Agree which accounts, who makes the call and what may be asked. If the accounts that carry the revenue stay off limits, their renewals are unverified and the terms should say who carries that.
What have we asked for in diligence that we still have not received?
Why ask it
The pattern in the gaps is information. One late document is a busy finance team. A whole category that keeps slipping, such as anything on one subsidiary or one customer, is a subject to raise with the seller in person before signing.
Terms
Are we buying the shares or the assets, and what does each route mean for liabilities and tax?
Why ask it
Broadly, shares bring the company's whole history with them while an asset deal lets the buyer choose what transfers, but the tax result and the treatment of staff and contracts vary a great deal by country. Put this to your lawyers and tax advisers in each jurisdiction before the offer letter fixes the structure.
How is the consideration split between cash, stock, earnout and escrow?
Why ask it
Each form puts risk in a different place. Cash at close is final, shares in the buyer leave the seller exposed to how the combined company does, and money held in escrow is what you can claim against later. Notice which part the seller pushed hardest to change, which often shows where their own doubts are.
If shareholders are being paid in shares, how was the exchange ratio set, and what happens if either company's value moves before close?
Why ask it
In a merger the ratio is the price, and each side has valued the other to reach it. Ask whether it is fixed or adjusts, whether there is a floor and a ceiling, and whose forecasts sat behind each valuation. Your advisers can say which protections are usual where the companies are listed or incorporated.
If part of the price is an earnout, who controls the things it is measured on?
Why ask it
After close the buyer usually decides pricing, headcount and which product gets investment, and each of those moves the earnout number. Agree the measure, the accounting rules behind it and what the seller may veto, since the first dispute tends to arrive with the first change the buyer makes.
Which representations and warranties are we relying on most, and what can we recover if one proves false?
Why ask it
A warranty is worth what you can recover under it. Look at the cap, the time limit, the amount held back, whether insurance covers the gap, and whether the seller will still exist as something worth claiming against in two years.
What is the seller free to do after close: start a rival, hire the staff, call the customers?
Why ask it
A buyer paying for relationships needs those relationships to stay where they are. How long and how wide a restriction a court will uphold differs by country and by state, so have counsel say what is enforceable where the seller lives and works, and do not copy the clause from the last deal.
What is the timetable from here to signing and close, and which step is most likely to slip?
Why ask it
List the dates you do not control: lender sign-off, third-party consents, any regulator's review, the seller's year-end accounts. Then set them against the exclusivity period in the offer letter. If that runs out before you are ready, the seller may be free to talk to other bidders again.
What can the target do between signing and close without asking us?
Why ask it
For those weeks or months the seller still runs a business whose risk you have largely taken on. Pay raises, long new contracts, deep discounts and large purchases are the usual items made subject to consent. Your lawyers will say how much control competition rules allow a buyer before clearance.
What would make us walk away, and is each of those things written into the conditions of closing?
Why ask it
Decide the list before the offer goes in, while stopping still costs little: a lost anchor customer, a refused consent, a number that moves past an agreed point. After signing, a buyer can usually leave only on the conditions the agreement names, so a reason that stayed in someone's head is not a way out. Counsel can say how narrowly such clauses are read under the law the contract is governed by.
People
Which people does this business actually run on, and what keeps them for the next two years?
Why ask it
Retention aimed at the org chart misses the people who hold the operation together, often two levels down. A useful test is who would have to be replaced within a month if they resigned tomorrow.
What will the founders and senior managers do after close, and would they stay without the retention money?
Why ask it
Someone staying only for a payment may be counting the months until it lands. Ask each of them which job they want in the combined company, and plan a successor for anyone whose answer is vague.
What has the target promised its people that we would be bound to honor?
Why ask it
Change-of-control payments, contractual bonuses, union agreements, pension commitments and equity promised over coffee all belong on this list. In some countries employees move across with their existing terms by law, so ask how it works in each place the target employs people.
Which roles exist on both sides, and who decides which person keeps the job?
Why ask it
Overlap in finance, HR and sales leadership is usually where the model finds its savings, which means real people are already implied by a spreadsheet. A selection process that always favors the acquirer's own staff tells the acquired team what its future is worth.
How do decisions actually get made at the target, and how far is that from the way we work?
Why ask it
Culture gaps show up as speed. A company where a manager can approve a discount on the spot will feel strangled by one that needs three signatures, and its best people may leave before anyone names the cause. Sit in on a real operating meeting if the seller allows it.
Who runs the acquired business on day one, and which decisions still route to us?
Why ask it
Left vague, this gets settled by whoever pushes hardest in the first few weeks. Ask for the list of decisions that stay with local management in writing: pricing, hiring, spending up to a limit. Autonomy that was only promised out loud tends to shrink the first time a budget is missed.
Who chairs the combined board and who leads the combined company, and what does the agreement say about the second year?
Why ask it
Shared leadership and an even split of seats can be what gets a merger signed. Find out who decides when two co-leaders disagree and on what date the seat allocation lapses, since that is when the real answer to who bought whom arrives.
What do we tell the target's staff, our staff and its customers, and in what order?
Why ask it
Sequencing matters more than wording. Customers who hear it from a competitor, and employees who hear it from customers, both conclude that nobody is in control.
Integration
Are we folding this business into ours or leaving it to run on its own, and who made that call?
Why ask it
Most later arguments about brand, systems and reporting lines are this decision being reopened. If the deal case counts on cost savings while management has been promised independence, one of those two things is not going to happen.
When merging two companies of similar size, whose systems, policies and pay scales become the standard?
Why ask it
With a clear buyer the default is the buyer's way. Between equals every choice is a negotiation, and picking the best of both, one function at a time, can outlast the savings plan. Agree the rule for choosing before the first argument, and name who breaks a tie.
Who leads the integration, and what are they being taken off to do it?
Why ask it
Integration run by someone with a full-time job elsewhere gets attention only when something breaks. Name the person before signing and give them authority in both companies, or the plan ends up belonging to nobody.
What has to work on the first morning after close?
Why ask it
Payroll, invoicing, bank access, email, insurance coverage and the customer support line make up the short list. None of it is strategic and all of it is noticed within hours, so test each item before the announcement.
What systems does the target run on, and what would it take to move it onto ours?
Why ask it
Put this to someone technical who has seen inside, not to whoever built the deal model. Software no vendor supports any more, logins shared between staff and one database that only its builder understands can each tie up engineers who were meant to be working on growth.
What will integration cost in cash and in senior attention, and where does that sit in the model?
Why ask it
Senior attention is harder to find than money and rarely appears in a budget. If the model has no integration line and no other project has been cut to make room, the cost is still there. It just has not been counted.
If this is a carve-out from a larger group, which services will the seller keep providing after close, for how long and at what price?
Why ask it
A division that has always leaned on its parent's payroll, IT and finance team has costs that never appeared in its own accounts. A transition services agreement covers the gap, but it expires, and the seller's staff have little reason to put your requests first once the money has moved.
What are we going to stop doing at the target, and when do we say so out loud?
Why ask it
Most acquisitions end something: a product, a brand, an office, a set of roles. Staff usually work out which before it is announced, so the damage to trust comes from the silence in between. Settle the date you will say it along with the decision.
What happens to the target's name after close: kept as it is, sold alongside ours or retired, and which did the price assume?
Why ask it
Retiring a name saves marketing money and gives up whatever loyalty was attached to it. If the model assumes customers will follow the product to a new label, ask what evidence there is, and whether a period carrying both names has been costed.
How will we know in twelve months whether this worked?
Why ask it
Write the test down before close, with numbers: revenue kept from the target's existing customers, named people still in their jobs, savings booked against the plan. Without it the deal gets judged by whatever happened to occur, and anyone can call that a success.
Who is still accountable for this deal a year from now?
Why ask it
Deal teams disband and advisers move on. If the person answering will not be measured on the outcome, their confidence about the assumptions costs them nothing.
What went wrong in our last acquisition, and what are we doing differently this time?
Why ask it
Even a company that buys often will repeat a mistake that nobody wrote down. If this is a first deal, borrow the lesson: ask an adviser or a peer who has bought a business of this size which month the trouble started.
Working through an acquisition
Practical guidance for the conversation itself
How to run the questioning
Ask each group at its stage
Strategy questions belong before the offer letter, while walking away is still cheap. Financials and Risks are the work of diligence. Terms get asked as the agreement is drafted, with the diligence findings on the table beside it. People and Integration are the groups most often left until after signing, which is too late for any answer that should have changed the price.
Ask for the source, not the summary
Management presentations are built to survive questions. Ask for the underlying document: the contract with the assignment clause, the aged receivables list, the actual employment agreement. Where a source cannot be produced, treat the claim as an assumption.
Separate price questions from plan questions
Diligence answers what the business is worth. Integration planning answers what it will take to keep it worth that. A team that mixes the two can pay for a synergy in the price and then fund it a second time out of the operating budget.
Put the answers in a live risk list with owners
Every unresolved answer should end up as one of four things: a change to the price, a warranty from the seller, money held in escrow, or a risk someone has agreed to accept. One that becomes none of those has been forgotten, not resolved.
Merging two companies instead of buying one
Most of the list assumes a buyer and a target. In a merger each side is both, so run the Financials and Risks groups on your own company the way the other side will. Settle who leads, whose systems win and how the share ratio was set before the announcement, while both boards still need each other's signature.
Before acquiring a brand
When the name is most of the price, change the order. Who owns the trademarks and why customers buy come first, ahead of the accounts, because a brand held by its founder personally, or propped up by discounts, changes what the accounts mean.
Who to ask, and what only they can tell you
- Second-line managers: where the process breaks and who really approves work.
- Finance staff below the CFO: which reports are manual, and which numbers get adjusted before they are shown.
- Recent leavers, where confidentiality allows: the reasons for turnover that exit interviews rarely capture.
- The target's largest customers, once permitted: whether they intend to renew and what they think they are buying.
- Engineering or operations leads: what would break first if volume doubled.
- The seller in person, where the process allows it: why now, and what they would fix first if they were staying.
- Your own lawyers, tax advisers and lenders: how the rules work in each country the target operates in, before the structure is fixed.
Where acquisitions go wrong
Deal momentum replacing judgment
Once fees have been paid and a board has been told, the cost of stopping feels higher than the cost of continuing. The practical defense is a written list of walk-away conditions, agreed before the offer goes in.
Retention offered too late
The people you most need often start getting calls from recruiters when the deal is announced, not when it closes. A retention offer that waits for integration planning can reach them after they have said yes to someone else.
Culture treated as a soft topic
The hard version of the culture question is concrete: how decisions get approved, how people are paid, what gets someone promoted, and what gets someone fired. Compare those four and you have the answer.