M&A Diligence: Know What You're Buying Before You Commit

• A seller's data room is built to sell, not to be evaluated by an informed third party. In one review, only about one in three of the seller's claims held up.
• Ask four questions of every data room: Do the seller's claims hold up? What's missing? What's expiring? What's changed since?
• Expired documents are as risky as missing ones. A permit or easement that lapses before close looks good on paper but can't be used.
• Verify power claims independently. A data center site that claimed 750 MW had nodes under 500 MW, and an N-1-1 power flow study showed 350 MW.
• A Paces M&A diligence report checks 175+ items in about five business days, with AI parsing the data room and in-house experts verifying every finding.
• Every report ends with a clear call (proceed, proceed with conditions, or do not proceed) and a ranked request list you can send straight back to the seller.

Josh Brown
Solutions Engineer, Paces

Nicole Silver
VP of Marketing, Paces

What is an M&A diligence report, and how is it different from other Paces reports?

Other Paces reports start from a parcel and run an independent analysis of the site. The M&A diligence report starts from the seller's data room and checks what the seller claims against the independent record, at a point in time, to find contradictions and gaps.

Does the M&A report cover data center deals or just renewables?

Both. About 60% of the reports so far have been for data center deals and 40% for solar and storage, and Paces continues to expand the asset types it covers.

How does it compare with running an AI model on the data room, or hiring a buy-side adviser?

Unlike a general AI tool, every finding is verified by Paces experts and draws on proprietary datasets such as withdrawal heat maps and permitting data. A buy-side adviser typically costs five to 10 times more and takes five to 10 times longer.

How long does an M&A diligence review take?

Typically five business days. It starts with a scoping call on the deal and ends with a recommendation: proceed, proceed with conditions, or do not proceed.

Is the report specific to the project's RTO/ISO and utility?

Yes. The data room's point of interconnection ties the review to the right ISO and utility, and Paces covers every ISO and utility in the Lower 48, at distribution, sub-transmission and transmission levels.

What do sellers most often get wrong?

On data center deals, water and site control. On solar and storage deals, permitting that's missing, incorrect or expired.

Does Paces review deals outside the US or work with sellers?

Not today. Paces is focused on US projects and on the buy side, and is open to conversations about other markets.

Nicole Silver [00:00:00]: Welcome, and thank you for joining. I'm Nicole Silver. I lead marketing at Paces, and this is Paces Accelerate session two. Today is gonna focus on M&A diligence. In our last session, we reviewed the interconnection pathways module. Today, we're gonna focus on learning what's really in a seller's data room before you commit capital to a project that you're acquiring.

Josh Brown [00:00:23]: Hey, everyone. Happy Thursday. Really excited to be back for the second installment of Paces Accelerate. I'm Josh Brown. I'm a solutions engineer here at Paces. Prior to Paces, I worked at National Grid for about three and a half years, and I've really seen a lot of these projects from inside the utility. And now I spent a lot of my time here at Paces evaluating these M&A deals, and we're gonna dive deep into what we do here to look into the deals.

Nicole Silver [00:00:47]: So to get started, we'll tell you a little bit about Paces Accelerate. This is a series designed to show you how Paces can help you achieve your goals. It's for buyers, for teams buying their way to power, for anyone signing up on a long term lease on a deal. We will help you in this webinar check the seller's claims against independent data beyond the data room, find what's missing, get to proceed, proceed with conditions, or do not proceed, and send a ranked request list straight back. Before we get into it, we'll go through some quick housekeeping. First, we are recording this session. Everyone who's registered will receive the replay in case you'd like to listen or share it with a colleague, and it'll live on the Paces website. Second, questions go in the Q&A box in your toolbar on the bottom right. Use it anytime. We're gonna hold some time at the end for all of your questions. And if there are any that we don't get to, we'll follow-up directly to get you the answer. It's a thirty minute session, so we're gonna dive right in. We're gonna start with why buyers are acquiring existing projects, talk a little bit about the macro environment, what buyers are asking us at Paces for. Josh will do a live walkthrough of an example of an M&A diligence report, and then we'll spend some time on your questions live. So if you're on this webinar, this is probably already very familiar, but it is worth highlighting that buying is now the faster path to power. The queue is crowded with over 2,000 gigawatts in queue. Building takes a long time, five plus years depending on what source you look at, and probably most importantly, only a fraction of the projects in that queue ever get built. So M&A is a much faster path to move forward, but the catch is when you're looking at an M&A deal or looking in a seller's data room, you might not have all the information that you need or a lot of time to make a decision. Today's focus on the M&A diligence report is one of the many modules that Paces offers through Paces reports. You can see a list here of all the different report types we offer from critical infrastructure to environmental analysis and power, and we've highlighted the M&A diligence report at the bottom. Now I'm gonna hand it over to Josh to take us into the next part.

Josh Brown [00:03:19]: So Nicole's done a really good job of setting the stage on why we really view this report as being extremely vital for industry players. So I wanna I wanna talk specifically about what we found running some of these reports, get into how we build the report itself, and then last but not least, do a live read of a sample report. So if we hop to the next page, this is one of the more interesting scenarios we've seen from a M&A report. So this came in a couple of months ago, and, essentially, the claim that we saw from the seller is that the site had air permits that allowed the buyer to actually run on-site gas as primary power. So not a backup power, but a primary power source. We went through almost 60 documents in the data room looking to confirm this air permit story. Almost every other aspect of the property followed the seller's claims. We really did expect these air permits to check out. But we actually found out not only were the air permits expired, not only were they for backup power only, but interestingly, they were for another site over a 100 miles to the east of that parcel. There were no air permits for the site. So we took a step back. We had two kind of main recommendations for this specific M&A client. One was to press the seller. Right? Maybe this was an honest mistake. They put the wrong documentation into this data room, and maybe there's air permits we can look at. When the seller couldn't produce those air permits for the site, we then basically told them to treat primary power as unpermitted. The next step we gave them right was to come and order a permitting matrix with air permit pathways from Paces to get a full picture of how feasible air permits would be to use as primary power for the site. Really good example of just one way that we saw the M&A data room come through for a client and show them that although everything else checked out, this site is not bankable and not buildable until you have that air permit story aligned. This next slide is another really interesting case study. So, again, this was a site that was brought where we thought everything was buttoned up. The client was really happy that the buyer thought that there wasn't really a need to come to us. Right? They were skeptical. They even needed us to be on the deal. They wanted a, you know, a site that was shovel ready and ready to go within two years, and they thought they had all that. We kinda had to do a little bit of convincing to get them into the M&A report kind of workflow. When we got them in, though, we immediately discovered, via our withdrawal heat maps on the platform, that all three nodes around the site had less than 500 megawatts of power compared to the 750 megawatts that were being claimed in the data room. Another interesting thing is we actually found that the utility hadn't even started the review for the site. So there was no way there was 750 megawatts of capacity if there was no review started by the utility. We also came across an active lawsuit for a title review and a bunch of other conflicts. It was crazy. Basically, one of three of every claim was true. Everything else fell apart. So a 100 of the 160. The data room was clearly built to sell and not built to be evaluated by a informed third party. Our recommendation here, somewhat similar to the last, order an N-1-1 power flow to get a full view of the power capacity. Bring those conflicts back to the seller to see if there are any remedies they could bring. And then last but not least, go to your internal legal counsel. Look at the lawsuit. Understand what you're working with. Our N-1-1 showed there was only 350 megawatts of capacity, so a little more than half of the power they claimed in 2028. Two really good examples of just live deals we've seen and kind of some of the takeaways. So when we do these, reviews, there are kind of four main questions that we ask of every data room. Probably most obviously, do the sellers claims hold up? Are there contradictions? Are there title flags? You know, are there air permits missing? Are there power stories that don't hold up? Acreage, serving utility, things like that. The second is what's missing. Right? So a gap analysis. A request list that you can immediately take to the seller to get a really good view of things that you actually need from them to make this any sort of deal you'd be willing to move on. The third is what's expiring. We see a lot of deals that come in with things that are past their shelf life. So, again, you might have permitting or you might have an easement that actually expires during the deal itself. It looks good on paper. In practice, you cannot use it because it's expired. And then last but not least, and what's really relevant, obviously, with a lot of the the recent kind of elections, what has changed since? Are there moratoriums coming in? Are there policy shifts that have happened on, you know, the utility side, on the the federal or the state or the local side have not been looked at in the data room. So this next slide's gonna sort of lay out the M&A diligence report product we have. So, again, this is an independent source read on what's in the deal. This is third party. You're not relying on what the seller's built. You're relying on a third party to actually evaluate this. I think a really good analogy is when you're buying a used car. Right? Do you take the person who's selling the used car at their word for everything going on, or do you take it to a mechanic shop and just quickly have everything checked out? Here's how it's made. Right? So we're able to do these typically in five business days. AI does an initial pass to parse the data room, and then our team of energy and data center experts verifies every finding against external research. We've got folks who used to be in permitting. We've got folks who used to be in power. All of these specifics of a data room that need to be checked, we have experts internally. Every review starts with a scoping call on the deal and ends with a clear answer. Proceed proceed with conditions or do not proceed. This next slide's gonna give you a little more of a breakdown into the actual makeup of the report. So, again, six sections. The recommendation, that's the proceed. Proceed with conditions or do not proceed. The contradictions. So that's where you might run the things where the record shows something different than what the seller's claiming, ranked risks, gaps, where the data room's silent, a shelf check, and a request list that allows you to send this back to the seller immediately. Three proof points. Right? So one, five business days on average. We've talked to this already. A 175 items checked. Sometimes this number gets even higher depending on how in-depth the data room is, but that's at least the lowest amount we'll look at. And then every one of these findings is verified by an expert. We've got former developers, former utility power engineers, folks from the DOE, really wide breadth and depth of expertise. And, again, it works with the data center. It works with, batteries, solar, any sort of generation asset. So it's a really powerful tool for you to have in your tool belt. So this next slide, I think, is my favorite. And when we talk to the internal team that does these M&A deals with myself included, one of the most important things they stressed before we had this webinar was to emphasize the scoping call. Obviously, every deal has a lot of context that is extremely relevant, something you wanna make sure that you're showing and talking through with our experts before we even dive into the data room. Someone who's buying property to get it powered in twelve months is a completely different story than someone who's buying property to get it powered in twenty four or thirty six months. Steps two, three, four, again, AI parses the room. Our internal experts spend most of that five day timeline looking through every finding, and then we rank those and source those and make sure that we've got one report ready for you to read through. Now I know we've done a bunch on the slides here. I think it's always really important, though, to actually get into a report. So I'm gonna go ahead and share my screen here and show y'all a sample report, which we're more than happy to send out here after we finish this call. So this M&A diligence report, again, prepared November 2026. This is a data center campus. We've got samples for a variety of different asset types. It's 21 pages. We don't have too much time, so I'm gonna skim through a few of the pages, but we'll spend a lot of time on some of the more important pages. So I'd argue this is probably the most important page. Right? This is the TL;DR, the kind of... If I'm only looking at one page, what should I look at? This is the recommendation. Always start with the most important information. First, the conditions to explore in addition to that recommendation. So for this specific sample, the conclusion is proceed with conditions. There are three distinct things that are blocking this deal, each with a named counterparty and a specific fix and timeline. The decision on the table here is actually whether to sign an LOI and not whether to close the deal. So it really goes to emphasize the, the kind of real flexibility we have in terms of looking at data rooms, whether it's to close, whether it's for an LOI, or any other aspect you're looking to evaluate. Some details on the concerns. Right? So this first one, pretty straightforward. There are six landowners. There is no site control with any of those six landowners. There's also a power contract we can't find. There are emails about it, but there is no power contract that's actually in the data room. And then last but not least, a moratorium. Right? We might not be able to even reach zoning approval. All three are open. And then these cure mechanisms kinda show you what would change it. Right? If we were able to get all three these fixed, this would very quickly move to a proceed recommendation. If we can't get things fixed here, this very quickly would move to a do not proceed. So it really shows you the the kind of nimbleness of these reports. You get a recommendation, and you get what would actually fix that recommendation to get you onto either the good or the bad side. I'm gonna breeze through the next couple pages. Again, what this asset is lays out basically what we're reviewing. Right? The site, what's within there, the interest, key facts, capacity allowed, development history. A lot of really interesting things here, but, again, with only about eight minutes, I wanna make sure that we hit on the ones that are very important. This next one, I think, is one of the more interesting ones in addition to the recommendation. Here are the contradictions. So, again, the seller says there's an executed version of the power contract that went out in September. Our review shows there's no contract anywhere. In the data room, there's only two emails that show what was transmitted. So a very clear line by line, especially with that deal blocker of things you can bring to the seller to say, hey. Maybe we missed it, but this is not in the data room. We checked and so did a third party. The sources here show you from both sides of the contradiction where we're getting the claims from. So this allows you to bring the seller the full context without it looking like it's your word against them. Again, you could say, hey. Look. We saw the emails. Maybe it's somewhere else, and you didn't include it. But it really gives you a, ability to come to them in a kind of good natured manner to say, let's figure out these contradictions. Rotary is another really interesting one. So this is one where, again, the data room itself contradicts something that is in both sides. Right? So you're seeing the data room saying the entitlement has 1,470,000 square feet, whereas the site plan building schedule shows 1,230,000 square feet. So it's not always gonna be our word versus theirs. Sometimes it is going to be their word versus their own. Again, things that might not line up. These next couple pages, I'm gonna go through somewhat quickly. These are the ranked risks. Right? So we've got our three deal block blockers we brought up at the front with the proceed with conditions recommendation. But then we've got a bunch more. Right? And these are always ranked from deal blocker the whole way down the low. Next one is conditions precedent. Again, what must clear and when? Price and cost impact. What fixing these gaps might actually cost you. Next is gonna be power and utilities. Right? So power, water, sewer, transport status. This is where the second deal blocker lives. Right? That power store where we don't have the actual letter. This next one's gonna be site control. So this is where the first deal blocker lives. Right? We don't have site control for those six parcels. For folks who wanna get really deep into any of the blockers, you can come into all these sections, or you can stay high level and look at the the kind of overall ranking list as well as the, conditions. Next is going to be, regulatory and permitting. So we get zoning, vesting, moratoriums, permit status. This is where the third deal blocker lives. Right? Fourteen and fifteen, we've got environmental. So this is geotech, floodplains, acoustics, contamination. 16, 17, this is corporate and financial. The entities, the finances, the tax position. 18, contract review. So this shows the terms the deal must carry. Here's another one I wanna touch on here. This is the gap section. So what we do here, right, is we lay out the material gaps in where there are areas that we want you to dig deeper. So of the 176 items checked, each is marked with evidence or its absence, 28 satisfied, 43 partial, 84 not provided, 21 not applicable. A gap in an item that doesn't apply are not the same thing as something that isn't applicable. Tax and incentives has three, including federal energy credits, which don't apply to a data center site. Understanding what doesn't apply in the data room is just as important as knowing what is missing. Let's go on to page 19. This is an interesting one as well. This is a shelf life check. So, again, this shows you what is not only expired, things that you really need to have remedied, but also things that might be stale, things that you should kinda double click on, go back to the the seller and make sure that you understand exactly where this date is from and the age and why it hasn't been updated. So, again, really interesting one. And now we're gonna finish, the request list. So this is if there is one thing to take away from the report that you wanna send back to the seller is this request list. So you can see the top three of the deal blockers, but then we've got another 16, high, medium, low. You could even just screenshot this table and email it to the seller and basically say, hey. For us to proceed anywhere, we need you to look and remedy all of these things that we believe we need to have within the deal. So, again, very, very quick run through. Totally understand that it's probably helpful to have this in your hands. We're happy to send this out later this week as well as other samples for other types. But wanna send it back over to Nicole. I think we've got a few more slides, and then really excited for the Q&A to hear what y'all are wanting to kind of dive deep into.

Nicole Silver [00:17:39]: So on that note of Q&A, we've seen a couple questions come in through the chat. Please feel free to send them in, especially if there was anything that Josh showed that you had a question about. So we've gone inside the report, and we wanna give a little bit of a recap. We started this off with a refresher on what Paces Accelerate is and that we had previously talked about interconnection pathways. Paces overall is where power developers decide. Our goal is to provide you with answers all the way through your development process that help you make decisions about your pipeline. We do that with software, with reports, which is what we're talking about today, and with services, including development support. We have 41 modules, a list that is growing almost every week across six categories, and we are committed to providing all of these reports in a very short turnaround, an average of five business days. All of this... The software report services are backed by access to over 300 datasets, and we are working with around 200 customers in power development. So if you have any questions about the M&A report that we talked through today or Paces in general, we're happy to take those now. I'll be monitoring them in the Q&A box, so please feel free to send them in. And we're gonna start with one that came in earlier, from somebody who asked, what is the M&A report, and how does it differ from your other reports?

Josh Brown [00:19:19]: Think that's the question we get the most. Right? Whenever we have these scoping calls with folks that come in, to kind of evaluate an M&A report, they're like, why is this different than your other reports? How do we know that this is, you know, something that's worth doing versus just running regular reports? I think the biggest thing, right, is the other reports start from a parcel. So you give us a site. We run an independent analysis. We're able to really drill into the areas you're interested in. This M&A diligence report starts from a data room. Right? It's a point in time data room that we're evaluating as a third party to give you a very good look to see what the seller is telling, if it's correct compared to the independent record, to make sure it holds up and to see what's missing. Right? So I think reports... And sometimes you'll see after an M&A report, we might recommend, like we did for the one example, to pull additional reports. But the M&A report is really focused on a data room at a moment in time, whereas our traditional reports are focused on a site and getting deep into that story.

Nicole Silver [00:20:13]: Okay. Next up. We look at both generation and large load sites. Do M&A reports cover data center deals too or just renewables?

Josh Brown [00:20:22]: So they cover renewables, data center deals. Again, I'll probably get in trouble for saying too many things about what we'll cover. But, generally, we're continuing to expand the asset types we cover. We continue to hire new experts that are able to help us expand our knowledge and build out the kind of tools we need internally to cover more. I would say of the ones we've seen so far, probably 60% are data center focused. The other 40% are solar and storage. But never say never to other tech types, and, you know, we're always happy to partner with folks on deals with really interesting claims and tech types.

Nicole Silver [00:20:55]: Next up, tell me about the financial review. Are you digging into contracts or building your own models?

Josh Brown [00:21:03]: Yeah. That's a good question. So I I think there's a couple ways to look at this. Right? So the first thing we do, right, is we are looking at all the claims that the seller has. By no means are we an investment bank that's going to build out a full fledged financial model, But at the same time, we have former developers that have built out the IRR NPV models that we see a lot of times in data rooms to make sure that it is something that checks out. So, again, we do a a pretty light financial review. You saw the sections that went over the finances and taxes. By no means is it a full soup to nuts review, but we can start to call out things that don't line up.

Nicole Silver [00:21:39]: Great. Questions are coming in hot now. This is great. How does the M&A report compare with just running an AI model on the data room on the one hand or using an M&A buy side adviser on the other hand?

Josh Brown [00:21:53]: Yeah. So I I think that's kind of a really good question in the sense that it shows the bookend of all possibilities. Right? So compared to doing this in Claude, there's a couple really distinct things. First, the experience that our our team has. I think we've got over thirty years of development experience across the team. Second, some of the proprietary datasets that we have access to. So, again, Claude's really good at pulling USGS floodplains. Will it be able to pull some of the withdrawal heat maps or some of the permitting information that we've got that's proprietary? I'm a little more skeptical. On the other side of the equation, the buy side, you know, M&A kind of advisory, that's going to be five to 10 x the cost. That is going to be five to 10 x the time. So, again, I've got a lot of good friends that work in M&A advisory. They are very smart people, and some deals, maybe it makes sense to pull them in. But if you're looking for something that's in between a AI kind of slop version of an M&A review and a very, very buttoned up Goldman Sachs review, I think this is the perfect report for that.

Nicole Silver [00:22:54]: And I wanna I wanna chime in there the reminder that it is always validated by our experts. So you're reducing the risk of an AI report, but increasing the speed from... The speed and reducing the cost from what you might get with an adviser.

Josh Brown [00:23:09]: Great point.

Nicole Silver [00:23:11]: The next one, very specific. Is the M&A report tailored to the interconnecting RTO ISO? How specific does this get?

Josh Brown [00:23:20]: Yeah. So we always start with the data room context. So, typically, in the data room, there'll be a POI. There'll be some sort of kind of regional context on where this actual, site is. So that will always tie us to the ISO. That will always tie us to the utility depending on the the development type, whether it's distribution or transmission focused. So there is some specialization there. But, again, we have coverage across the Lower 48. Every ISO, we're able to run these for all utilities. So by no means are there any geographic areas where we cannot run this report, and by no means are there any kind of power levels, whether it's distribution, transmission, or sub transmission that we cannot evaluate one of these reports for.

Nicole Silver [00:24:00]: Okay. I'll take this one. There was a question in the chat asking about Paces' coverage across other markets outside The US. Today, we are focused on The US. We are discussing international expansion for the future. So if there are specific markets that you're interested in, feel free to reach out directly or let your Paces representative know. Do you work with sellers as well?

Josh Brown [00:24:25]: As of now, we have not. I think we're always really interested in kind of expanding how we can bring our expertise to developing energy assets on the grid. So we're always open to that conversation. But I think, generally, we started to kinda sharpen our pencils on the buy side and see that as the initial opportunity. But I think similar to Nicole's answer for geographic expansion, we are always evaluating things. And if it makes sense, that could certainly be something that comes down on the road map.

Nicole Silver [00:24:54]: What do you most commonly see that the seller got wrong when you review the M&A data room?

Josh Brown [00:25:00]: That's an interesting one. So it depends on the tech type. Right? So I I think one of the things that we've seen a lot on the data center side is things on the water and site control. So, again, the power story sometimes will be right, sometimes won't. Those things change very frequently. I'm sure folks know better than me the 75 megawatt kind of cutoff that Abbott put out earlier this year. So things like that come across. But a lot of times, it's the water and the site control. Those are the kind of things that it's really hard for folks to get answers if they're looking online in public sources. That's when having our experts being able to call the water folks, being able to have the relationships with the utilities, the, the agencies are able to pull kind of site control really makes a huge difference. On the solar and storage side, I think some of it comes down to permitting. Right? So it's been really interesting to see how permitting's evolved, and I'm sure with the change in DC, maybe things will continue to evolve. It's, it's interesting to come across a lot of those reports that we see where the data room just doesn't really have a comment on permitting or the permitting's incorrect or it's expired. A lot of things are in there, and they look really good, but they are past their date and are expired and, obviously, are just as bad as not having it at all if it's not an active, permit or entitlement or thing along... Things along those lines.

Nicole Silver [00:26:14]: Perfect. So we're gonna take one more. There are a handful of questions about data, data currency, data recency, and how often it's refreshed. So we'll answer that. And then for any questions that weren't addressed directly in this webinar, we will follow-up with you, very shortly in the next few days with a specific response.

Josh Brown [00:26:35]: So on the data side, right, I think Paces' entire ethos is to make sure that we are never the cause of data being out of date. And what I mean by that is we're essentially scraping daily anything that's public. We're scraping ISO base cases. We're scraping CEII data. We also have folks, like I mentioned earlier, that are doing outreach. That outreach is for projects, whether it's M&A or traditional. We continue to get information on that. Really good example is we've been calling on distribution gas lines recently. Those are the kind of datasets that we've seen very few people have. So not only are the datasets that everyone have... That everyone has updated very frequently, there's a lot of those proprietary datasets that we're able to pull in and refresh extremely fast. A lot of that's due to the AI back end. A lot of those due to relationships that our developers have built. So really powerful kind of combination there, and we're always really excited to talk about our data because we believe it's the freshest and most accurate in the industry.

Nicole Silver [00:27:31]: Perfect. Well, thank you to everybody for joining us for your questions. The goal of Paces Accelerate is to make these sessions valuable for you to talk about, reports and modules that are relevant for you and your business. So we'd love to hear from you what topics would be most valuable for you. Feel free to message us in the Q&A now or email marketing@paces.com. We look forward to seeing you next quarter. Thank you.