DiligenceValuation
Deduction List
Also known as: Risk register, buyer's adjustment list
The buyer's internal spreadsheet cataloging every risk, weakness, and gap found during due diligence — each one a line item that reduces what they'll pay or tightens the terms.
WHY IT MATTERS
During due diligence, the buyer’s deal team catalogs every risk, gap, and weakness they find into a single document. That document is the deduction list. Each line item becomes either a dollar reduction to the purchase price or a structural concession — a larger escrow, a longer earnout, tighter reps and warranties. The deduction list is the buyer’s leverage tool. It turns qualitative findings (“the founder is the only person who knows the top 3 customers”) into quantitative adjustments (“we’re reducing the multiple by half a turn for key-person risk”). Founders rarely see the deduction list directly, but they feel its effects in every revised term. The businesses that survive diligence with the fewest deductions are the ones that resolved their risks before going to market — not the ones that tried to explain them away at the negotiating table.