DUE DILIGENCE

Our Mergers & Acquisitions attorneys are experienced in conducting legal due diligence on behalf of buyers, as well as working with sellers to prepare responses to due diligence requests. We understand the importance of conducting a comprehensive due diligence review in a cost-effective, timely manner to enable buyers to evaluate the value and risks of the target business without jeopardizing the deal due to unnecessary delays.

Every deal is different; so, due diligence must be tailored to fit each particular deal. When we begin the due diligence process on behalf of a buyer, we prepare a checklist that is specifically designed to enable the buyer to evaluate the sellers business, assets, and prospective liabilities. The following simple due diligence checklist is an example of some of the items that should be included in a typical due diligence review. This form is not comprehensive.

DUE DILIGENCE CHECKLIST FORM

Company Formation and Corporate Governance

  • The Company’s Certificate of Formation or Articles of Incorporation
  • The Company’s Bylaws, Limited Liability Company Agreement, Limited Partnership Agreement or equivalent governing documents
  • The Company’s minute book, including all minutes and written resolutions of shareholders and directors
  • The Company’s organizational chart
  • The Company’s list of shareholders listing the number of shares held by each shareholder
  • Copies of agreements relating to rights of first refusal and options
  • A Certificate of Good Standing from the Secretary of State of the state where the Company is formed

Financial Information

  • Audited (if available) financial statements for three years
  • The Company’s general ledger
  • Any management reports, projections, and capital expenditure budgets
  • A schedule of all debt and contingent liabilities
  • An inventory schedule
  • Accounts receivable and accounts payable schedules
  • Copies of any business or asset valuations

Physical Assets

  • A schedule of fixed assets and their locations
  • Copies of all U.C.C. filings
  • Copies of all equipment leases
  • A schedule of sales and purchases of equipment in the prior three years

Real Estate and Environmental

  • A schedule of the Company’s locations
  • Copies of all real estate leases, deeds, mortgages, and title policies
  • Copies of any environmental audits
  • A list of hazardous substances used or handled by the Company
  • Copies of all environmental permits and licenses
  • A list of any environmental litigation or investigations

Intellectual Property

  • A schedule of domestic and foreign patents, trademarks, copyrights and applications
  • A description of know-how and other unregistered intellectual property
  • Copies of all consulting agreements, work for hire agreements, licenses, and any assignments of intellectual property
  • A list of any claims by or against the Company regarding intellectual property

Licenses and Permits

  • Copies of any governmental licenses, permits, or consents

Employees and Employee Benefits

  • A list of employees including titles and salaries
  • Copies of all employment, consulting, confidentiality, or non-competition agreements
  • A copy of the Company’s employee handbook
  • Copy of the summary plan descriptions of qualified and nonqualified retirement plans
  • Copies of any collective bargaining agreements
  • A description of all employee litigation, claims and disputes as well as labor disputes within the last three years
  • A description of benefits of all employee health and welfare insurance policies

Material Contracts

  • Copies of all contracts between the Company and any related parties, such as officers, directors, shareholders, or affiliates
  • Copies of all loan agreements, lines of credit, or promissory notes, including security agreements, mortgages, indentures, and similar agreements
  • Copies of any distribution agreements, sales representative agreements, and supply agreements
  • Copies of all material contracts

Product and Service Information

  • A list of all products or services
  • Copies of the Company’s standard terms & conditions and samples of invoices
  • Copies of all complaints or warranty claims

Customer Information

  • The Company’s customer list, indicating the amount of sales to each customer
  • A description of the Company’s marketing plans, budgets, and printed marketing materials

Litigation and Insurance

  • A list and summary of all pending and threatened litigation
  • Copies of all insurance policies, including general liability, product liability, errors and omissions, directors and officers, personal and real property, worker’s compensation, and other insurance
  • A schedule of the insurance claims history over the prior three years

Taxes

  • Copies of all federal, state, local, and foreign tax returns for the last three years
  • Description of any federal, state, local or foreign audits or correspondence from tax authorities
  • Copies of any tax settlement documents from the IRS from the prior three years
  • Copies of all employment tax filings from the past three years
  • Copies of any tax liens

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