ERP Due Diligence Checklist for Acquisitions

Why Technology Due Diligence Is Undervalued in PE Deals

In a competitive deal process, technology due diligence is often treated as a checkbox rather than a substantive work stream. The financial model is built on management accounts. The legal team reviews contracts. The commercial team validates the revenue thesis. And the ERP system — the operational backbone of the entire business — gets a two-hour walkthrough with the CFO.

The consequences show up in the first 100 days. A legacy ERP that cannot be integrated without six months of custom development. A chart of accounts that does not support multi-entity reporting. Customer and vendor data that has never been cleaned and cannot be migrated reliably. These are not minor inconveniences — they are deal value destroyers that should have been priced into the transaction.

This checklist is designed to surface those risks before close, not after.

Section 1: Current Systems Inventory

Questions to Ask

What ERP system is the company currently using? What version? When was it last upgraded? Who manages it internally? Is it hosted on-premise or in the cloud? What is the annual licensing and maintenance cost? Are there any outstanding support tickets or known system issues?

Documents to Request

Current software contracts and renewal dates. IT infrastructure diagram showing all connected systems. List of all third-party integrations and their criticality to daily operations. Any IT audit reports or system health assessments from the past 24 months.

Red Flags

ERP system that is end-of-life or no longer supported by the vendor. Heavy reliance on a single internal IT person who owns institutional knowledge of custom configurations. Multiple systems with no integration — sales data in one place, financials in another, inventory in a spreadsheet.

Section 2: Data Quality Assessment

Questions to Ask

When was the customer master data last cleaned? Are there duplicate vendor records? How is the chart of accounts structured — does it support the reporting requirements of the acquiring entity? What is the process for month-end close and how long does it take? Has the company ever restated financials due to accounting system errors?

Documents to Request

Sample data export from the ERP covering customers, vendors, and chart of accounts. Last three months of management accounts produced directly from the ERP — not from Excel. Reconciliation between ERP output and audited financials.

Red Flags

Management accounts produced in Excel rather than directly from the ERP. Month-end close taking more than ten business days. CFO unable to produce standard reports from the system without manual intervention. Large volume of manual journal entries relative to automated transaction processing.

Section 3: Integration Complexity and Migration Risk

Questions to Ask

What systems will need to be integrated or replaced post-close? Are there custom integrations between the ERP and other operational systems? Who built those integrations and is that code documented? What is the estimated timeline and cost to migrate to the acquiring entity's standard ERP platform?

Documents to Request

Architecture diagram of all system integrations. Documentation for any custom code or API integrations. IT project history showing any prior system migrations or implementations.

Red Flags

Undocumented custom integrations that only one person understands. ERP data that cannot be exported in a standard format. Prior failed ERP implementation or migration in the company's recent history.

Section 4: Total Cost of Ownership Post-Close

Technology due diligence should include a post-close cost model covering ERP migration or implementation, data migration and cleansing, integration development, staff training, and the internal bandwidth cost of managing the transition while maintaining normal operations. For most acquisitions in the $20M–$100M revenue range, this total is $150,000–$500,000 depending on complexity. It should be modelled explicitly and either reflected in the purchase price or budgeted in the 100-day plan.