Imported from arjundrath-star/klade-analyst (clients/_archived/peter/skills/data-room-analyzer/SKILL.md). Install upstream with npx skills add arjundrath-star/klade-analyst --skill data-room-analyzer. Copyright stays with the author.

data-room-analyzer

Systematically ingest, categorize, and analyze a virtual data room (VDR) for M&A due diligence. The VDR is the single most important artifact in any deal — it contains every document the buyer needs to underwrite an acquisition. This skill automates the grunt work: indexing every document, flagging gaps against a standard diligence checklist, extracting key findings by category, and producing a diligence summary memo that a deal team can immediately act on.

Trigger

• "Analyze data room for [DEAL/COMPANY]"
• "Data room review"
• "VDR diligence summary"
• "What's missing from the data room?"
• "Data room gap analysis"
• "Diligence memo from VDR"
• "Index the data room"

Inputs

Required

• Data room contents: File listing or document index (CSV, directory listing, or VDR platform export)
• Target company: Name of the acquisition target
• Deal type: M&A buy-side / sell-side / refinancing / IPO (default: M&A buy-side)

Optional

• Diligence checklist: Custom checklist (default: standard M&A diligence checklist)
• Priority areas: Specific focus areas (e.g., "IP ownership", "customer concentration", "environmental liabilities")
• Transaction value: Approximate deal size for materiality thresholds
• Industry: Target's industry for sector-specific diligence items
• Timeline: Expected close date (affects urgency flagging)

Dependencies

• financial-data-api — data source stack (see ../financial-data-api/SKILL.md)
• sec-edgar-fetch — SEC EDGAR integration for public company targets

⚠️ DATA SOURCING MANDATE (NON-NEGOTIABLE)

1. VDR Documents (PRIMARY): All analysis must reference specific documents from the data room. Never fabricate document contents or assume availability.
2. SEC EDGAR (SUPPLEMENTARY for public targets): Cross-reference VDR financials against public filings to identify discrepancies.
3. web_search (CONTEXT ONLY): Industry benchmarks, comparable deal terms, regulatory requirements. Never substitute for VDR document review.

Methodology

Step 1: Data Room Indexing

Ingest the full document listing and build a structured index:

Standard VDR Categories (10 sections):

For each document found:

• Assign to category and sub-category
• Note file type, date, page count
• Flag if stale (>12 months old for time-sensitive docs)
• Flag if draft vs. executed version

Step 2: Gap Analysis

Compare indexed documents against the standard diligence checklist:

Criticality scoring:

• 🔴 Critical Missing — Deal-blocker; must be produced before signing (e.g., audited financials, cap table, material contracts)
• 🟡 Important Missing — Should be produced before closing; absence creates risk (e.g., IP assignments, environmental Phase I)
• 🟢 Nice-to-Have Missing — Helpful but not deal-critical (e.g., org charts, employee handbook)

Industry-specific gap items:

• Technology: Source code escrow, OSS license audit, SOC 2 reports, data processing agreements
• Healthcare: HIPAA compliance, clinical trial data, FDA correspondence, provider agreements
• Manufacturing: Environmental permits, OSHA records, product liability history, supply chain mapping
• Financial Services: Regulatory examination reports, BSA/AML compliance, capital adequacy
• Real Estate: Phase I/II environmental, title reports, zoning compliance, rent rolls

Step 3: Document-Level Analysis

For each major document category, extract key findings:

Financial Analysis:

• Revenue trend and composition (recurring vs. one-time)
• EBITDA margins and adjustments (management vs. audited)
• Working capital trends and seasonality
• CapEx requirements (maintenance vs. growth)
• Quality of earnings indicators (cash conversion, DSO/DPO/DIO trends)
• Audit opinion type (unqualified, qualified, going concern)

Legal & Contractual Analysis:

• Change of control provisions in material contracts
• Non-compete/non-solicit enforceability
• Key customer contract expiration schedule
• Litigation exposure (quantify probable + possible losses)
• Consent requirements for assignment

IP & Technology Analysis:

• IP ownership chain (employee invention assignments, contractor work-for-hire)
• Third-party license dependencies
• Patent expiration timeline
• Open-source license compliance risk
• Freedom-to-operate concerns

HR & Employment Analysis:

• Key employee retention risk
• Unfunded pension/OPEB obligations
• Employment agreement triggers on change of control
• Contractor misclassification risk
• WARN Act exposure

Step 4: Red Flag Identification

Systematically scan for deal-risk indicators:

Step 5: Diligence Memo Drafting

Produce a structured diligence summary memo organized by:

1. Executive Summary — Overall data room completeness, top 5 findings, recommended actions
2. Category-by-Category Findings — Key items, risks, and follow-up questions per section
3. Gap List — Complete list of missing items with criticality ratings
4. Red Flags & Risk Items — Prioritized list with estimated impact and mitigation
5. Follow-Up Request List — Specific additional documents or information needed from seller

Step 6: Materiality Calibration

Set materiality thresholds based on deal size:

• Contracts: Material if >5% of revenue or >$X,000 annual value
• Litigation: Material if >1% of enterprise value
• Related-party: All related-party transactions flagged regardless of size
• Tax positions: Material if >$X00K exposure
• Customer concentration: Flag if any customer >10% of revenue

Step 7: Comparable Transaction Benchmarks

When analyzing a target's data room, contextualize findings against precedent transactions in the same sector. This transforms raw data room analysis into deal-ready intelligence.

Precedent Transaction Research:

web_search("[INDUSTRY] M&A transactions acquisition multiples [YEAR-2] [YEAR-1] [YEAR]")
web_search("[INDUSTRY] precedent transactions enterprise value EBITDA revenue multiples")
web_search("[TARGET COMPANY] comparable acquisitions similar companies sold")

Benchmark Table (include in every data room analysis with financial docs present):

Context Application:

• Compare target's implied valuation (if available) against precedent medians
• Flag if data room financials suggest metrics materially different from precedent targets (e.g., lower margins, higher growth)
• Note deal structure differences (stock vs. cash, earnout %, escrow) that affect comparability
• Identify if target is trading at a premium or discount to precedents and why

Minimum standard: 5 named precedent transactions with specific multiples. No ranges without underlying data. If fewer than 5 are available in the exact sub-sector, expand to adjacent sectors with explicit notation.

Step 8: Post-Close Integration Red Flags

Data room analysis should proactively identify integration risks — these are the issues that destroy value after closing. Scan every data room against this checklist:

IT Systems & Technology Integration:

• ERP system: identify platform (SAP, Oracle, NetSuite, custom) — different platforms = $X00K–$XM migration cost
• CRM system: Salesforce, HubSpot, custom — customer data migration risk
• Data hosting: on-premise vs. cloud; if on-premise, assess migration timeline
• Cybersecurity: SOC 2 report present? Penetration testing? Incident history?
• Custom software: any proprietary systems without documentation = integration nightmare
• IT contracts: check for change-of-control termination provisions in SaaS/hosting agreements

Key Person Dependencies:

• Founder/CEO centrality: does revenue depend on personal relationships?
• Top salesperson concentration: if top rep generates >20% of revenue, retention is critical
• Technical key persons: is critical IP knowledge concentrated in 1-2 engineers?
• Non-compete scope: do key employees have enforceable non-competes?
• Employment agreement change-of-control triggers: golden parachutes, acceleration, termination rights
• Retention packages: are stay bonuses budgeted? Typical = 6-24 months salary for key employees

Customer Overlap & Revenue Risk:

• Customer overlap with acquirer: shared customers may consolidate spend (revenue at risk)
• Customer consent requirements: do contracts require customer consent for assignment?
• Key customer reaction risk: will top customers re-bid if ownership changes?
• Revenue portability: how much revenue follows the company vs. follows individuals?
• Contract assignability: check every material contract for assignment restrictions

Regulatory & Compliance Integration:

• HSR/antitrust: deal size threshold ($111.4M in 2024) — filing required?
• Industry-specific approvals: FCC, state insurance, banking regulators, CFIUS
• License transferability: are permits/licenses transferable or must they be re-applied?
• Data privacy: GDPR/CCPA consent requirements for customer data transfer
• Environmental: Phase I complete and current? Known contamination = buyer liability post-close

Cultural & Operational Integration:

• Compensation philosophy mismatch: target pays commission-heavy, acquirer is salary-based (or vice versa)
• Remote vs. in-office policy differences
• Benefits gap: target has better/worse health/retirement plans — harmonization cost
• Union/labor agreements: do they survive change of control?
• Facility consolidation: lease terms, break clauses, overlap assessment

Step 9: Missing Documents Escalation Framework

Not all missing documents are equally important. Weight each gap by materiality to focus the deal team's follow-up requests.

Materiality Scoring Matrix:

Escalation Protocol:

1. Weight 10 items: Immediate escalation to deal lead + counsel. Include in "Conditions to Closing" tracker. Set 48-hour response deadline.
2. Weight 8 items: Include in first follow-up request list. Flag as "purchase price adjustment items" if not produced within 1 week.
3. Weight 6 items: Include in follow-up request list with specific rationale for why each item is needed.
4. Weight 4 items: Batch into second-round diligence request.
5. Weight 2 items: Request if time permits; note absence in diligence memo as a limitation.

Missing Document Impact Template (add to output):

━━━ MISSING DOCUMENTS — MATERIALITY-WEIGHTED ━━━
| # | Missing Item | Category | Weight | Impact if Missing | Deadline |
|---|-------------|----------|--------|-------------------|----------|
| 1 | [Item]      | X.X      | 10     | [Specific risk]   | 48 hours |
| 2 | [Item]      | X.X      | 8      | [Specific risk]   | 1 week   |
| 3 | [Item]      | X.X      | 6      | [Specific risk]   | 2 weeks  |

Total materiality-weighted gap score: XX / [possible]
Assessment: [Deal can proceed with caveats / Critical items must be produced / Data room incomplete for closing]

Output Format

📁 Data Room Analysis — [Target Company]
Prepared: [Date] | Transaction: [Deal Type] | Data Room as of: [Date]
Total Documents Indexed: XXX | Categories Covered: X/10

━━━ EXECUTIVE SUMMARY ━━━
Data room completeness: XX% (XX/XX standard items present)
Critical gaps: X items requiring immediate production
Red flags identified: X items requiring investigation
Overall assessment: [Well-organized / Adequate / Significant gaps / Incomplete]

Top 5 Findings:
1. [Finding — e.g., "Revenue concentration: top 3 customers = 62% of revenue with contracts expiring within 18 months"]
2. [Finding]
3. [Finding]
4. [Finding]
5. [Finding]

━━━ DATA ROOM INDEX ━━━
| Section | Category              | Docs Found | Expected | Status |
|---------|-----------------------|-----------|----------|--------|
| 1.0     | Corporate & Org       | XX        | XX       | 🟢/🟡/🔴 |
| 2.0     | Financial             | XX        | XX       | 🟢/🟡/🔴 |
| 3.0     | Tax                   | XX        | XX       | 🟢/🟡/🔴 |
| 4.0     | Legal & Litigation    | XX        | XX       | 🟢/🟡/🔴 |
| 5.0     | Contracts & Commercial| XX        | XX       | 🟢/🟡/🔴 |
| 6.0     | Intellectual Property | XX        | XX       | 🟢/🟡/🔴 |
| 7.0     | Real Estate & Assets  | XX        | XX       | 🟢/🟡/🔴 |
| 8.0     | HR & Employment       | XX        | XX       | 🟢/🟡/🔴 |
| 9.0     | Regulatory & Compliance| XX       | XX       | 🟢/🟡/🔴 |
| 10.0    | Insurance             | XX        | XX       | 🟢/🟡/🔴 |

━━━ CRITICAL GAPS (🔴) ━━━
| # | Missing Item                    | Category | Impact | Recommended Action |
|---|--------------------------------|----------|--------|--------------------|
| 1 | [Item]                         | X.X      | [Impact] | [Action + timeline] |
| 2 | [Item]                         | X.X      | [Impact] | [Action + timeline] |

━━━ IMPORTANT GAPS (🟡) ━━━
| # | Missing Item                    | Category | Impact |
|---|--------------------------------|----------|--------|
| 1 | [Item]                         | X.X      | [Impact] |

━━━ RED FLAGS ━━━
| # | Finding | Category | Severity | Est. Impact ($) | Mitigation |
|---|---------|----------|----------|-----------------|------------|
| 1 | [Flag]  | X.X      | High/Med/Low | $X,XXXK  | [Action]   |

━━━ CATEGORY FINDINGS ━━━

**1.0 Corporate & Organizational**
- Cap table: [Key findings — fully diluted ownership, option pool, any unusual structures]
- Governance: [Board composition, voting agreements, drag-along/tag-along rights]
- Follow-up: [Specific questions or missing items]

**2.0 Financial**
- Revenue quality: [Recurring %, customer concentration, trend analysis]
- EBITDA bridge: [Reported vs. adjusted, nature of add-backs]
- Working capital: [Trends, seasonality, normalization issues]
- Follow-up: [Specific questions]

[Continue for sections 3.0–10.0]

━━━ FOLLOW-UP REQUEST LIST ━━━
| # | Request | Priority | Category | Rationale |
|---|---------|----------|----------|-----------|
| 1 | [Specific document/information] | Critical/High/Medium | X.X | [Why needed] |

━━━ TRIPLE-THREAT LENS ━━━
🏦 **Banker:** [Data room quality assessment for deal execution — will this pass buyer diligence? What needs remediation before going to market? Are there deal structure implications (escrow, earnout, reps & warranties)?]
📊 **Accountant:** [Quality of earnings implications — are the financials audit-ready? What adjustments are likely in a QoE report? Working capital normalization issues?]
💰 **Wealth Manager:** [For a buyer: what's the real risk here? Hidden liabilities? Integration complexity? Post-close surprises to budget for?]

Quality Gates

• All 10 standard VDR categories assessed with document counts
• Gap analysis uses three-tier criticality scoring (🔴🟡🟢)
• Red flags quantified with estimated dollar impact where possible
• Industry-specific diligence items included based on target's sector
• Materiality thresholds documented and consistently applied
• Follow-up request list is specific (not generic) — references actual gaps found
• Change of control provisions identified across contracts
• Financial data cross-referenced against public filings (if public target)
• Stale documents flagged with date stamps
• Triple-threat lens references specific findings from the analysis
• Every finding traces to a specific document or identified gap

Professional Standards

What separates A from B:

• A-grade: Every gap has a specific recommended action with timeline. Red flags quantified with dollar impact. Industry-specific items beyond the standard checklist. Cross-references between categories (e.g., employment agreements flagged in HR section also noted in change-of-control analysis). Materiality calibrated to deal size.
• B-grade: Generic checklist comparison without prioritization. No dollar quantification of risks. Missing industry-specific items. No cross-referencing between sections.

Common pitfalls:

• Treating all gaps equally — a missing org chart is not the same as missing audited financials
• Not checking document dates — a 3-year-old environmental assessment is essentially useless
• Ignoring draft vs. executed status — a draft contract has no legal weight
• Missing change-of-control provisions — the #1 post-close surprise in middle-market M&A
• Not cross-referencing financial data room docs against public filings for inconsistencies
• Failing to flag related-party transactions that may not survive post-acquisition

See Also

• vendor-due-diligence — sell-side financial diligence report
• letter-of-intent-analyzer — LOI terms that drive diligence scope
• credit-analysis — credit-focused diligence for financing