Due diligence

M&A and corporate finance glossary: 16 entries in English and Polish

M&A and corporate finance glossary: due diligence

The entries in this section describe the investigation of a company before a deal: its types, from financial and tax to IT and ESG due diligence, the red flag report, the information request list, the seller’s disclosures, and the rules under which competitors share sensitive information.

Prepared by the Capital One Advisers team. Entries last reviewed: November 12, 2026.

Entries from A to Z (16):

Clean team
Commercial due diligence, CDD
Confirmatory due diligence
Disclosure
Disclosure schedules, disclosure letter
Due diligence
ESG due diligence
Financial due diligence
Information request list
IT and cybersecurity due diligence
Legal due diligence
Operational and technical due diligence
Quality of earnings, QoE
Red flag report
Reliance letter
Tax due diligence

Clean team

Polish: clean team

A clean team is a ring-fenced group on the buyer’s side, usually external advisors and employees not involved in day-to-day sales, pricing, or competitive strategy, that alone has access in due diligence to the company’s most commercially sensitive information, such as prices, margins, and customer contract terms. It is used when the buyer is a competitor of the company: exchanging such information between competitors can amount to a prohibited anticompetitive agreement (Article 6(1) of the Polish Competition and Consumer Protection Act) whether or not the deal needs merger clearance, and where clearance is required it also raises the risk of implementing the concentration prematurely. A separate agreement or protocol sets out who belongs to the clean team, what information it receives, and how it reports its conclusions to the buyer’s deal team, usually in aggregated form.

Commercial due diligence, CDD

Polish: komercyjne / rynkowe due diligence

Commercial due diligence (CDD) is an investigation of the company’s market and its position in it: market size and growth, competition, market shares, customers and their loyalty, pricing, sales channels, and how realistic the business plan is. It draws on market data, interviews with customers, suppliers, and industry experts, and analysis of the company’s sales data. It is usually commissioned by financial buyers and sometimes also by the lending bank, because the cash flow projections and the valuation depend on the market assumptions.

Confirmatory due diligence

Polish: due diligence potwierdzające

Confirmatory due diligence is an investigation in which the buyer verifies information and assumptions established earlier, usually in a selected scope, for example when the seller has provided a vendor due diligence report or the buyer already knows the company well, and sometimes also between signing and closing. It verifies the findings of the seller’s reports, resolves open questions, and updates the information as of a date close to signing or closing. It can shorten the process and lower the buyer’s costs, but the buyer must assess whether the seller’s reports, its own checks, and the contractual protections are enough to cover the remaining risks.

Not to be confused with: sell-side due diligence, vendor due diligence, VDD.

Disclosure

Polish: ujawnienie

Disclosure is the seller’s provision of information about matters that make a representation or warranty untrue or incomplete, so that the buyer enters into the agreement aware of them. A matter disclosed as the agreement requires usually gives no grounds for a claim for breach of a representation or warranty, but it may justify a price reduction or a special indemnity. The parties agree in the contract whether only the disclosure schedules (or the disclosure letter) count as disclosed, or also documents in the virtual data room and answers given during the process. The scope of disclosure also determines how much the sandbagging provisions matter.

More in the article “He sold his company for PLN 87.4 million. After 19 months the buyer demanded PLN 11.3 million back”.

Disclosure schedules, disclosure letter

Polish: list ujawnień

Disclosure schedules are schedules to the purchase agreement in which the seller discloses to the buyer matters that are exceptions to the representations and warranties, such as a pending dispute, an unusual contract, or arrears. In UK-style deals, a separate disclosure letter usually plays the same role. A disclosure excludes or limits, to the extent the agreement provides, the seller’s liability under the representations and warranties for the matter disclosed, so the buyer insists that disclosures be specific and allow their consequences to be assessed. The agreement specifies whether the entire contents of the virtual data room count as disclosed or only the disclosure document itself, and whether the seller may update it before closing.

More in the article “He sold his company for PLN 87.4 million. After 19 months the buyer demanded PLN 11.3 million back”.

Due diligence

Polish: due diligence

Due diligence is the investigation of a company, usually carried out by the buyer and its advisors before signing, to confirm what the buyer is acquiring, identify risks, and determine their effect on the price and the terms of the agreement. It usually covers financial, tax, and legal matters and, depending on the deal, also commercial, operational, IT, environmental, and ESG areas. It relies on documents made available in the virtual data room, questions and answers, and meetings with management. The risks identified can lead to a price adjustment, special indemnities, or conditions precedent and, in severe cases, to abandoning the deal.

More in the article “Due diligence is the last round of price negotiation”.

ESG due diligence

Polish: due diligence ESG

ESG due diligence is an investigation of the company from an environmental, social, and governance perspective: contamination and environmental liabilities, emissions, working conditions and safety, the supply chain, human rights, business ethics, and anti-corruption measures. Buyers, especially funds and financial institutions, carry it out because of their own investment policies, reporting obligations, and risks that could lower the company’s value or make financing harder to obtain. Some findings, such as soil contamination, directly affect the price and the special indemnities.

Financial due diligence

Polish: finansowe due diligence

Financial due diligence is an investigation of the company’s financial position for the purposes of a deal, usually carried out by the buyer’s advisor or, in vendor due diligence, by the seller’s advisor. It estimates adjusted (normalized) EBITDA, analyzes net debt and debt-like items, sets out the normal level of working capital, and assesses the quality of cash flows, capital expenditures, and the reliability of projections. A statutory audit of the financial statements results in an auditor’s report containing an audit opinion, while financial due diligence analyzes the figures that drive the price and the price mechanism.

More in the article “The owner’s EBITDA and the EBITDA a buyer will pay for are two different numbers”.

Information request list

Polish: lista dokumentów i informacji do due diligence

An information request list is the list of documents and data needed for due diligence that the buyer or its advisors send to the seller, divided into areas such as corporate matters, finance, tax, contracts, HR, real estate, and IT. The seller makes the documents available in the virtual data room and marks which requests it has fulfilled. A seller that has prepared for the sale gathers the standard documents before receiving the list, which shortens due diligence.

IT and cybersecurity due diligence

Polish: due diligence IT i cyberbezpieczeństwa

IT and cybersecurity due diligence is an investigation of the company’s IT systems, their architecture, licenses, dependence on vendors, technical debt such as outdated components that will need replacing, data protection, resilience to attacks, and the history of security incidents. In technology companies, it covers the source code, rights to the software, and the use of open source software. The findings inform estimates of integration costs and post-acquisition investment, shape the representations and warranties, and, where serious gaps exist, can affect the price.

Legal due diligence

Polish: prawne due diligence

Legal due diligence is an investigation of the company’s legal position: its formation and ownership structure, the seller’s title to the shares, the articles of association and resolutions, material commercial and financing contracts, including change of control clauses, real estate, intellectual property, permits and licenses, employment matters, disputes, and compliance with regulations, such as data protection and competition law. The report identifies risks, their consequences, and how to address them in the sale agreement, and its shorter version, limited to the most serious risks, is a red flag report. Its findings shape the representations and warranties, the conditions precedent, and the special indemnities.

Operational and technical due diligence

Polish: operacyjne i techniczne due diligence

Operational and technical due diligence is an investigation of how the company works in practice: the condition and efficiency of plants, machinery, and infrastructure, production and logistics processes, the supply chain, quality, organization, and operating costs. The buyer uses it to assess investment needs, including deferred maintenance capital expenditures, possible savings, and how realistic the cost synergies are. It is carried out by industry advisors and engineers, often together with an environmental assessment of the sites and buildings.

Quality of earnings, QoE

Polish: badanie / analiza jakości wyniku

A quality of earnings (QoE) review is the part of financial due diligence that establishes the company’s sustainable, recurring level of earnings, usually EBITDA, on which the buyer can base the price. It removes the effect of one-time and unusual items, adjusts for related-party transactions and the owner’s private expenses, aligns accounting policies, and checks whether earnings are backed by cash flow. A key output is an EBITDA bridge (EBITDA reconciliation) showing the adjustments from reported EBITDA to adjusted (normalized) EBITDA. It is carried out by the buyer’s advisor or, in vendor due diligence, by the seller’s advisor.

More in the article “The owner’s EBITDA and the EBITDA a buyer will pay for are two different numbers”.

Red flag report

Polish: raport red flag

A red flag report is a short due diligence report that identifies the company’s serious problems and risks (red flags), their possible financial consequences, and how to address them in the deal, without a full description of the areas reviewed. It is prepared when the buyer needs to decide quickly or wants to limit the cost of the investigation. Risks are usually ranked by severity, from those that could kill the deal to those requiring specific contractual protection.

More in the article “Due diligence is the last round of price negotiation”.

Reliance letter

Polish: reliance letter

A reliance letter is a letter in which the author of a due diligence report, such as an advisory firm or a law firm, grants a named party that did not commission the report the right to rely on its findings for the transaction and to claim damages from the author for losses caused by errors in the report, on the terms set out in the letter. Providing the report to a buyer does not by itself create a contract between the buyer and the report’s author, and a reliance letter can provide the basis for such claims. In M&A transactions, reliance letters are issued, among other cases, for vendor due diligence reports and for reports commissioned by the buyer and made available to its lenders. In vendor due diligence, prospective buyers usually receive the report or a draft of it after signing a non-reliance letter, in which they waive claims against the author relating to the report and accept that they use the report at their own risk. In a typical auction process, the selected buyer may receive a reliance letter, usually when it signs the purchase agreement. The letter can also extend to banks or other institutions financing the deal. The author typically caps its liability in the letter and sets a deadline for giving notice of claims or bringing them. The parties also negotiate which reports and versions the letter covers and whether its benefit can be transferred to others, such as future lenders.

Tax due diligence

Polish: podatkowe due diligence

Tax due diligence is an investigation of the company’s tax filings mainly for periods that are not yet time-barred and, where needed, earlier periods, for example when they affect the current use of tax losses, to identify arrears and risks that may burden the company after the deal, and indirectly the buyer. It usually covers corporate income tax, VAT, payroll withholding and social security contributions, civil law transactions tax, local taxes, transfer pricing, withholding tax, reliefs and exemptions, and the tax consequences of the deal itself and its structure. The buyer reflects the risks identified in the price or covers them with special indemnities or tax representations and warranties with an extended claims period. When a business or an organized part of it is acquired, the buyer may be jointly and severally liable with the seller for the seller’s tax arrears, within the limits set by Article 112 of the Polish Tax Ordinance.

If you are preparing a company for a buyer’s due diligence, see the service page M&A Transactions (Mergers and Acquisitions).

Other sections of the glossary: Deal basics and types, Sale process and documents, Valuation, Price and settlement, SPA and risk allocation, Shareholders and investor rights, Financial statements and metrics, Stock exchange, Corporate banking. Index of all entries: M&A and corporate finance glossary.