Due diligence checklist for acquiring an A/E firm

What should an A/E due diligence checklist cover?#

An A/E due diligence checklist should cover seven areas: financials and work in progress, contracts, licensure, professional liability, people, clients and backlog, and systems with their archives. The table lists what to request in each area and the red flags that usually change price, structure or the integration plan.

Operating partners at AEC platforms tend to run the first six well because advisers have templates for them. The seventh area, systems and archives, is often reduced to a software list, which is where data rights problems hide.

Contracts and professional liability: what to read closely#

Contract review in an A/E deal should focus on the forms the firm actually signed rather than the template it prefers. Many firms use industry standard owner-architect or owner-engineer forms for private clients, sign client-written MSAs for institutional and corporate clients, and accept agency terms on public work. Each can treat ownership of drawings, confidentiality and assignment differently.

Read for standard of care, limitation of liability, indemnity, assignment and change of control, ownership of instruments of service, and record retention. Pair the contract review with the claims history, because a pattern of claims in one service line often traces back to contract terms accepted in that line.

Ask the broker how prior-acts coverage will work after closing, because claims on closed projects can arrive years after completion and the deal structure affects which policy responds. Treat these answers as inputs for counsel and the broker, not conclusions; contract terms and state rules differ.

The section most checklists miss: data rights, exports and archive custody#

Data rights diligence asks who owns and controls the firm's drawings, models and project records, whether they can be exported intact, and who physically holds them. These questions decide whether the platform can integrate the firm's history, defend future claims with it and, if it chooses, license internal workflow records later.

A useful vocabulary for documenting answers comes from the Data & Trust Alliance's Data Provenance Standards, which group dataset metadata into Source, Provenance and Use. The Use group includes elements such as consent documentation location, license to use, intended data use, and copyright, patent and trademark status, which map well to archive notes.

AI clauses to look for in client contracts#

AI clauses are newer contract terms that restrict how a design firm may use client project information with AI tools or for training. They appear in client-written MSAs, renewals and amendments more often than in older standard forms, so check recent paperwork for each major client.

Whether a given use is permitted is decided contract by contract with counsel. The goal in diligence is to know which clients have which restrictions, so the integration team can tag those projects in the archive.

• 1Prohibitions on using project information to train or improve machine learning models.
• 2Restrictions on uploading drawings, specifications or correspondence to third-party AI tools.
• 3Confidentiality obligations that survive project completion without an end date.
• 4Return-or-destroy obligations for client data at project close.
• 5Client approval requirements for reusing project content in marketing, research or other work.

Illustrative: a platform's diligence on a structural engineering firm#

Illustrative: a fictional PE-backed AEC platform is acquiring a structural engineering firm that runs Deltek Ajera for time and billing, keeps Revit models on an on-premise file server, reviews shop drawings in Bluebeam Studio, and tracks RFIs in Procore on larger jobs. Older projects sit on a founding principal's personal cloud drive.

Diligence finds that most private-client contracts leave the firm owning its instruments of service, but some public-sector contracts transfer ownership to the agency. One institutional client's recent MSA amendment prohibits using its project information to train AI models. The personal drive holds the only copy of several closed projects.

The platform makes transfer of the personal drive to company storage a closing deliverable, adds the client restrictions to an archive inventory that tags each project by contract terms, and asks for representations covering IP ownership and compliance with client confidentiality. After closing, integration starts from a clean archive map instead of a server migration guess.

Document request list for the data and archive section#

The document request list below covers the data and archive section and can be added to a standard diligence request without slowing the deal. Before signing, descriptions and contract copies are enough; transfers of the archive itself belong in closing deliverables and the integration plan.

• 1A list of every system holding project, time, document, markup or correspondence records, with the years each covers.
• 2A map of archive locations, including personal accounts, external drives and offsite storage.
• 3Copies of each contract form in use, plus client-written MSAs for the largest clients.
• 4Any agreement under which the firm shared or licensed project data with a third party.
• 5The firm's record retention policy and any active legal holds.
• 6Vendor terms covering data export and access after a subscription ends.

How SourceX approaches A/E records after a deal#

SourceX does not run M&A diligence, but the archive work above is what a later licensing review relies on. After closing, SourceX applies the SourceX five-step transaction, Supply, Rights, Preparation, Approval and Delivery, to the acquired firm as its own supplier.

Licensable scope in A/E firms usually centers on internal workflow records, such as RFI reasoning, review comments and QA/QC history, rather than client deliverables. A SourceX Evidence Packet records provenance, licensing rights, permitted use, the privacy record and release authorization for anything that proceeds.