Red Flag Reports That Deal Teams Actually Read

A due diligence report that runs to two hundred pages will be read by one person, briefly, on the way to a meeting. Structure it for that reader.

Lead with five things

The executive summary should contain no more than five findings: those that would change the price, the structure, the warranties required, or the decision to proceed. One line each, with the consequence and the recommendation. If everything is a red flag, nothing is.

Severity that means something

Define the scale in the report itself. A workable version: Critical — may prevent completion or requires a price adjustment; High — requires specific contractual protection; Medium — requires post-completion remediation; Low — noted for completeness. Then apply it consistently, which is easier said than done across six reviewers and worth checking before the report goes out.

One owner per finding

Every finding needs a named person responsible for the next step, and the next step should be an action rather than “to be discussed”. Findings without owners are the ones that reappear as post-completion problems.

Show the arithmetic

“Several customer contracts contain change-of-control consent rights” is not actionable. “Eleven agreements representing 34% of FY25 revenue require counterparty consent, of which four permit consent to be withheld at absolute discretion” is. Quantify against a denominator the deal team already uses.

State the methodology and the limits

What was reviewed, how, what was sampled, what was excluded, and what could not be assessed because the document was not provided. Gaps in the data room are findings in their own right, and listing them protects everybody — not least because the question after completion is always about what was not seen.

Make the appendix navigable

The detail belongs in a structured schedule indexed to source documents, ideally delivered as data rather than as prose so the deal team can filter it. Nobody reads an appendix; people search one.