Proof.
Suppose that M' is as in (1). Then
M = M' \otimes _ P P' = M' \otimes _{A'} A = M' \otimes _ A^\mathbf {L} A' = M' \otimes _{P'}^\mathbf {L} P
The first two equalities are clear, the third holds because M' is flat over A', and the fourth holds by More on Algebra, Lemma 15.61.2. Thus (2) holds. Conversely, suppose K' is as in (2). We may and do assume M is nonzero. Let t be the largest integer such that H^ t(K') is nonzero (exists because M is nonzero). Then H^ t(K') \otimes _{P'} P = H^ t(K' \otimes _{P'}^\mathbf {L} P) is zero if t > 0. Since the kernel of P' \to P is nilpotent this implies H^ t(K') = 0 by Nakayama's lemma a contradiction. Hence t = 0 (the case t < 0 is absurd as well). Then M' = H^0(K') is a P'-module such that M = M' \otimes _{P'} P and the spectral sequence for Tor gives an injective map
\text{Tor}_1^{P'}(M', P) \to H^{-1}(M' \otimes _{P'}^\mathbf {L} P) = 0
By the reference on derived base change above 0 = \text{Tor}_1^{P'}(M', P) = \text{Tor}_1^{A'}(M', A). We conclude that M' is A'-flat by Algebra, Lemma 10.99.8.
\square
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