• PDFs: Contracts, agreements, financial statements, org charts, compliance certificates
• Word documents (.docx): Drafts, memos, term sheets, employment agreements
• Spreadsheets (.xlsx, .csv): Financial models, cap tables, revenue breakdowns, projections
• Text files: Notes, summaries, correspondence
• Images: Scanned documents, org chart screenshots

1. Document Inventory & Classification
2. Contract & Legal Analysis
3. Financial Analysis
4. Risk Assessment & Scoring
5. Synthesis & Report Generation

1. Scan the directory using Glob to find all files recursively:

   • **/*.pdf

     ,

     **/*.docx

     ,

     **/*.xlsx

     ,

     **/*.csv

     ,

     **/*.txt

     ,

     **/*.md

     ,

     **/*.png

     ,

     **/*.jpg

     ,

     **/*.jpeg

   • Also check for any subdirectory structure that reveals organizational intent (e.g., folders named "Legal", "Financial", "HR")
2. Read each document using the Read tool. For PDFs, use the

   pages

   parameter to sample key pages (cover page, table of contents, signature pages). For spreadsheets, read headers and first rows to understand structure.
3. Classify each document into one of these categories:

   Category	Examples
   Master Agreement	MSA, SPA (Stock Purchase Agreement), APA (Asset Purchase Agreement), Merger Agreement
   Ancillary Agreement	Non-compete, Non-solicitation, Transition Services Agreement, IP Assignment
   Employment	Employment agreements, offer letters, severance plans, key person agreements
   Financial Statement	Balance sheet, income statement, cash flow statement, audit reports
   Financial Model	Projections, DCF models, revenue forecasts, budget vs. actuals
   Cap Table / Equity	Cap table, option pool, warrant schedule, convertible note summary
   Tax	Tax returns, tax opinions, transfer pricing documentation
   IP / Technology	Patent schedules, trademark registrations, license agreements, source code audits
   Regulatory / Compliance	Permits, licenses, compliance certificates, regulatory filings
   Organizational	Org charts, board minutes, corporate governance documents, bylaws
   Insurance	Insurance policies, coverage summaries, claims history
   Real Estate / Leases	Lease agreements, property schedules, environmental assessments
   Customer / Revenue	Customer contracts, revenue schedules, churn data, pipeline reports
   Litigation	Pending litigation summaries, settlement agreements, legal opinions
   Correspondence	Letters of intent, emails, negotiation memos, management presentations
   Other	Any document not fitting the above categories

4. Assess completeness by checking for standard deal room requirements:
   • Is there a primary transaction agreement (SPA, APA, or Merger Agreement)?
   • Are audited financial statements present for at least 2-3 years?
   • Is there a cap table or equity summary?
   • Are material contracts identified and included?
   • Are employment agreements for key executives present?
   • Is there litigation disclosure?
   • Are IP schedules present?
   • Are tax returns or tax opinions included?
5. Produce the Phase 1 output: A structured inventory table and a gap analysis identifying missing document categories.

1. Prioritize documents for review:
   • Priority 1: Master transaction agreement (SPA, APA, Merger Agreement)
   • Priority 2: Ancillary agreements (non-competes, TSAs, IP assignments)
   • Priority 3: Material third-party contracts (customer agreements, vendor contracts, leases)
   • Priority 4: Employment agreements for C-suite and key personnel
   • Priority 5: All remaining legal documents
2. For each contract, extract the following terms (where applicable):
   Deal Structure & Consideration
   • Transaction type (asset purchase, stock purchase, merger, investment)
   • Purchase price and form of consideration (cash, stock, earnout, escrow)
   • Purchase price adjustments (working capital, net debt, closing adjustments)
   • Earnout provisions (metrics, measurement period, caps, acceleration triggers)
   • Escrow terms (amount, duration, release conditions, claim procedures)
   Representations & Warranties
   • Scope and specificity of seller/target reps
   • Knowledge qualifiers ("to the knowledge of" -- how defined?)
   • Materiality qualifiers and Material Adverse Effect definition
   • Sandbagging provisions (pro-sandbagging, anti-sandbagging, or silent)
   • R&W survival periods (general, fundamental, tax, specific)
   Indemnification
   • Indemnification caps (percentage of purchase price; compare to market norms of 10-15% for general, 100% for fundamental)
   • Indemnification baskets/deductibles (tipping vs. true deductible; threshold amount)
   • Special indemnities (tax, environmental, litigation, IP)
   • Limitation on damages (consequential, punitive, lost profits)
   • Sole remedy provisions and carve-outs (fraud, intentional breach)
   Covenants & Obligations
   • Pre-closing covenants (ordinary course of business, consent requirements)
   • Post-closing covenants (non-compete scope and duration, non-solicitation)
   • Restrictive covenant enforceability (geographic scope, time limits, FTC considerations)
   • Information rights and access obligations
   Closing Conditions
   • Regulatory approvals required (HSR, CFIUS, foreign investment, industry-specific)
   • Third-party consents required (change of control provisions)
   • Material adverse change/effect conditions
   • Minimum closing conditions and walk-away rights
   • Termination provisions and break fees
   Termination & Exit
   • Termination rights for each party
   • Break-up fees and reverse break-up fees (amount and triggers)
   • Outside date / drop-dead date
   • Tail provisions for representations and warranties
   IP Provisions
   • IP assignment completeness (all registered and unregistered IP?)
   • License-back arrangements
   • Open source contamination risk
   • IP indemnification
   • Employee/contractor IP assignment agreements
   Employment & Key Person
   • Key person retention agreements and terms
   • Change of control payments and golden parachutes
   • Non-compete and non-solicitation terms for key employees
   • 280G excise tax gross-up or cut-back provisions
   Liability & Insurance
   • D&O tail insurance requirements
   • R&W insurance (if applicable -- who bears cost, scope, retention)
   • General liability limitations
3. Compare extracted terms to market standards using these benchmarks:

   Term	Market Standard (Middle Market)	Market Standard (Large Cap)
   General indemnity cap	10-15% of purchase price	5-10% of purchase price
   Fundamental rep cap	100% of purchase price	50-100% of purchase price
   General rep survival	12-18 months	12-24 months
   Fundamental rep survival	36-72 months or statute of limitations	Statute of limitations
   Basket/deductible	0.5-1% of purchase price	0.25-0.75% of purchase price
   Non-compete duration	2-5 years	2-3 years
   Non-compete geography	Relevant market area	Worldwide (with reasonableness limits)
   Working capital adjustment	Collar with true-up	Collar with true-up
   Escrow amount	5-15% of purchase price	2-10% of purchase price
   Escrow duration	12-18 months	12-18 months
   Break-up fee	2-4% of equity value	2-4% of equity value

4. Flag non-standard or concerning provisions:
   • Terms significantly outside market ranges
   • Ambiguous language that could be interpreted adversely
   • Missing standard protections
   • Asymmetric provisions favoring one party
   • Provisions that may be unenforceable in relevant jurisdictions
   • Unusual definitions or carve-outs

1. Extract historical financial data from statements and spreadsheets:
   Income Statement Analysis (3-5 years if available)
   • Revenue by segment/product/geography
   • Revenue growth rates (year-over-year, CAGR)
   • Gross margin and trends
   • EBITDA and adjusted EBITDA (identify each adjustment and assess reasonableness)
   • SG&A as percentage of revenue (trend analysis)
   • R&D spending levels and capitalization practices
   • One-time or non-recurring items (frequency of "non-recurring" items is itself a red flag)
   • Customer concentration (top 10 customers as % of revenue)
   Balance Sheet Analysis
   • Working capital components and trends
   • Net debt position (total debt minus cash and equivalents)
   • Debt maturity schedule and covenants
   • Off-balance-sheet liabilities (operating leases, guarantees, pending litigation)
   • Goodwill and intangible assets (percentage of total assets -- impairment risk)
   • Accounts receivable aging (DSO trends, concentration risk)
   • Inventory analysis (DIO trends, obsolescence risk)
   • Deferred revenue analysis (trend and quality)
   Cash Flow Analysis
   • Free cash flow generation and conversion rate
   • Cash flow from operations vs. net income (persistent divergence is a red flag)
   • Capital expenditure requirements (maintenance vs. growth capex)
   • Working capital cash flow impact
   • Dividend and distribution history
2. Analyze projections and forecasts (if provided):
   • Compare projected growth rates to historical performance
   • Assess reasonableness of margin expansion assumptions
   • Identify hockey-stick patterns and challenge underlying assumptions
   • Compare projections to industry benchmarks
   • Sensitivity analysis: What happens at 75% and 50% of projected revenue?
   • Identify key assumptions driving the model (customer wins, pricing changes, cost reductions)
   • Bridge analysis: Walk from current state to projected state
3. Quality of Earnings indicators:
   • Revenue recognition policies and changes
   • Non-recurring adjustments to EBITDA (sum total and trend)
   • Related-party transactions
   • Change in accounting policies or estimates
   • Audit qualifications or emphasis of matter paragraphs
   • Management override indicators
4. Valuation sanity checks:
   • Implied multiples (EV/Revenue, EV/EBITDA, P/E) vs. comparable transactions
   • Implied growth rate embedded in purchase price
   • Breakeven analysis on investment return
5. Financial red flags checklist:

   Red Flag	Check	Finding
   Revenue declining or decelerating
   Gross margin compression
   EBITDA adjustments > 25% of reported EBITDA
   Recurring "non-recurring" items
   Cash flow from ops diverging from net income
   DSO increasing faster than revenue
   Customer concentration > 20% single customer
   Related party transactions
   Audit qualifications
   Working capital deterioration
   Off-balance-sheet liabilities
   Aggressive revenue recognition
   Goodwill > 50% of total assets
   Debt covenant compliance concerns

1. Compile all findings from Phases 1, 2, and 3 into a unified risk register.
2. Rate each finding using this framework:
   Severity Scale:

   Rating	Definition	Financial Impact Proxy
   CRITICAL	Deal-breaker or fundamental value impairment. Requires resolution before closing or significant price adjustment.	>15% of purchase price at risk
   HIGH	Material risk requiring contractual protection, specific indemnity, or price adjustment.	5-15% of purchase price at risk
   MEDIUM	Notable concern requiring monitoring, disclosure, or minor contractual protection.	1-5% of purchase price at risk
   LOW	Minor issue requiring awareness but unlikely to impact deal value materially.	<1% of purchase price at risk

   Likelihood Scale:

   Rating	Definition
   Almost Certain	>90% probability of materializing
   Likely	60-90% probability
   Possible	30-60% probability
   Unlikely	10-30% probability
   Remote	<10% probability

3. Categorize risks into these domains:
   • Legal / Contractual Risk: Inadequate protections, unfavorable terms, enforceability concerns
   • Financial Risk: Revenue quality, margin sustainability, projection credibility, debt
   • Operational Risk: Key person dependency, customer concentration, supplier risk
   • Regulatory Risk: Compliance gaps, pending regulatory changes, approval uncertainty
   • IP / Technology Risk: IP ownership gaps, open source contamination, technology obsolescence
   • Tax Risk: Uncertain tax positions, transfer pricing exposure, structural tax issues
   • Integration Risk: Cultural mismatch, system compatibility, customer retention during transition
   • Market Risk: Competitive threats, market decline, disruption risk
   • Litigation Risk: Pending or threatened litigation, historical patterns
   • Environmental / ESG Risk: Environmental liabilities, ESG compliance gaps
4. Calculate a composite Deal Risk Score:

   Deal Risk Score = Sum of (Severity Weight x Likelihood Weight) for all findings
   
   Severity Weights: CRITICAL=10, HIGH=5, MEDIUM=2, LOW=1
   Likelihood Weights: Almost Certain=5, Likely=4, Possible=3, Unlikely=2, Remote=1
   
   Scoring Bands:
   0-25:   LOW RISK -- Standard deal protections sufficient
   26-50:  MODERATE RISK -- Enhanced protections and specific indemnities recommended
   51-100: HIGH RISK -- Significant price adjustment or structural changes needed
   100+:   CRITICAL RISK -- Recommend reconsidering deal or fundamental restructuring

5. Map risks to mitigation strategies:

   Mitigation Type	When to Apply
   Price Reduction	Quantifiable, certain financial impact
   Specific Indemnity	Identified contingent liability with uncertain timing/amount
   Escrow / Holdback	Post-closing adjustment risk, earnout uncertainty
   R&W Insurance	Broad contractual risk transfer, supplement to indemnification
   Closing Condition	Risk that must be resolved before transaction closes
   Covenant / Restriction	Ongoing behavioral risk requiring contractual guardrails
   Walk Away	Unmitigable risk exceeding deal value
   Further Diligence	Insufficient information to assess risk

1. Write the report using the Write tool. The file should be created at

   [deal-room-directory]/deal-room-analysis.md

   .
2. Follow this exact report structure:

undefined

• What this deal is (transaction type, parties if identifiable, consideration)
• Overall risk assessment (composite score and band)
• Top 3 critical findings that could impact deal value or structure
• Overall recommendation (proceed with conditions / proceed with caution / significant concerns / recommend against) ]

1. Executive Summary
2. Document Inventory & Completeness Assessment
3. Transaction Structure Overview
4. Contract & Legal Analysis 4.1. Key Transaction Terms 4.2. Representations & Warranties Analysis 4.3. Indemnification Framework 4.4. Restrictive Covenants 4.5. Closing Conditions & Regulatory 4.6. IP & Technology Provisions 4.7. Employment & Key Person Analysis
5. Financial Analysis 5.1. Historical Financial Performance 5.2. Quality of Earnings Assessment 5.3. Balance Sheet Analysis 5.4. Cash Flow Analysis 5.5. Projection Assessment 5.6. Valuation Considerations
6. Risk Assessment 6.1. Risk Scoring Methodology 6.2. Risk Heat Map 6.3. Critical & High Risk Findings 6.4. Medium & Low Risk Findings
7. Comparison to Market Standard Terms
8. Negotiation Recommendations 8.1. Must-Have Items (Deal Breakers if Not Addressed) 8.2. Should-Have Items (Strongly Recommended) 8.3. Nice-to-Have Items (Negotiating Leverage)
9. Open Items & Further Diligence Required
10. Appendices

• Transaction Type:
• Parties:
• Consideration:
• Key Dates:
• Governing Law:

• Finding description
• Source document reference
• Evidence
• Potential financial impact
• Recommended mitigation]

1. [Item]
   • Current State: [what exists now]
   • Recommended Position: [what to demand]
   • Rationale: [why this matters]
   • Fallback: [minimum acceptable outcome]

1. [Item]
   • Current State: [what exists now]
   • Recommended Position: [what to request]
   • Leverage Point: [why the other side should agree]

1. [Item]
   • Value: [what this is worth]
   • Trade For: [what you could get in exchange]

3. **Ensure the report meets professional standards**:
   - Every factual claim references a specific document
   - Risk ratings are consistently applied
   - Market comparisons use the benchmarks from Phase 2
   - Negotiation recommendations are actionable and specific
   - The tone is measured, analytical, and objective
   - No speculative language without explicit qualification
   - All dollar amounts and percentages are clearly sourced

4. **Print a summary to the user** after writing the file:

ANALYSIS COMPLETE

1. [finding]
2. [finding]
3. [finding]

---

1. Never fabricate document contents. If you cannot read a file or it is empty, note it as "unreadable" in the inventory and flag it as an open item.
2. Never invent financial figures. Only report numbers that are explicitly found in the documents. If projections are missing, state that they are missing.
3. Always cite the source document for every finding. Use the format:

   [filename, page X]

   or

   [filename, row X]

   .
4. Be conservative in risk ratings. When uncertain, rate higher rather than lower. It is better to over-flag than to miss a material risk.
5. Distinguish between facts and inferences. Use language like "The agreement states..." for facts and "This suggests..." or "This may indicate..." for inferences.
6. If the deal room is sparse, still complete all five phases. Note gaps prominently and emphasize what cannot be assessed due to missing information. A report that clearly identifies what is unknown is more valuable than silence.
7. Do not provide legal advice. Frame findings as observations and recommendations for review by qualified counsel. Use language like "Counsel should review..." and "We recommend legal analysis of..."
8. Handle confidential information appropriately. Do not include actual dollar amounts or party names in console output. Reserve specifics for the written report only.
9. Progress reporting. At the start of each phase, print:

   [PHASE N/5] Starting: [Phase Name]

   At the end of each phase, print the phase output summary.
10. Time management. If the deal room contains more than 50 documents, prioritize by category importance (transaction agreements first, then financials, then everything else). Note any documents that were deprioritized.

• Unreadable files: Log in inventory as "UNREADABLE -- [reason]". Continue analysis with available documents.
• Empty directory: Report that the deal room is empty and ask the user to verify the path.
• No contracts found: Complete financial and organizational analysis. Note the absence of legal documents as a CRITICAL gap.
• No financials found: Complete legal analysis. Note the absence of financial documents as a CRITICAL gap.
• Mixed quality documents: Clearly distinguish between executed/final documents and drafts/working copies in the inventory.