Phase gate: due diligence is running ahead of the deal-fee plan

Project Northwind · acquisition, EV $180M · Firm J · diligence phase · raised at 35% of expected deal fees · a cost difference prompts a scope question, not an automatic cut

Budget trajectory by phase

Spent vs budget vs comparable median

118K

Structuring · budget 120K

640K of 560K

Due diligence

fcst 410K

Drafting · budget 380K

fcst 330K

Negotiation · budget 300K

fcst 150K

Closing · budget 140K

Spent to date$758,000 of $1,500,000 · 51% of planPredicted total deal fees$1.65M · 0.92% of EV · p overrun 0.66Comparable median, $100–250M EV$1.40M · 0.78% of EV · diligence 28% of feesMain driversdiligence scope expanded to 2,400 contracts; partner share 36%; three jurisdictions added

Scope diligence vs full diligence

Recommendation confidence 0.72

Remaining diligence budget (context only; not added to cost) Contracts in scope Contracts above materiality threshold Predicted cost-to-go at full scope Share of full-scope cost at materiality-based scope Overrun factor at full scope

Full scope as requested

—

Materiality-based scope with sampling

—

Expected saving from scoping (one cost-to-complete baseline; excludes the risk of a missed material issue, stated below): —. Five comparable deals this year used materiality-based scope with sampling; none reported a missed material issue post-closing.

Approve materiality-based scope Re-budget to $1.65M Re-staff: cap partner at 25%Full scope, note reason

What changed since the last gate

Diligence scope expanded from 900 to 2,400 contracts after the data room opened.
Partner share rose to 36%; three jurisdictions added for subsidiaries.
Target's counsel changed; response times doubled.

Comparable unit of work

UnitAcquisition · $100–250M EV · diligence phaseMatched onEV band, structure (share deal), regulated target, auction vs bilateralExcludedCarve-outs, distressed, cross-border above 5 jurisdictionsCohortn=64 · through 30 SepMatched median$392K for this phaseCurrent forecast$640K (+$248K)

Question for the firm first. What extra volume or complexity explains the difference? Request scope, staffing and approved exceptions before challenging the fee.

Draft scope clarification

Deal budget read-across

Deal economics read-across: at the current trajectory legal fees reach 0.92% of EV against a 0.78% benchmark; the fee cap in the engagement letter triggers at $1.6M. Corporate development is notified; nothing changes in the deal model without their sign-off. Accruals and reserves.

Decision log

Every option taken here is recorded with the forecast it was based on, so the model can be scored on realized outcomes. Deal and matter gate decisions this quarter: 58 · scoped 31 · re-budgeted 14 · re-staffed 9 · full scope 4.