The Due Diligence Process
THE FOLLOWING IS A LIST OF THE INFORMATION YOU SHOULD COMPILE FOR THE DUE DILIGENCE PROCESS
This is not a complete list, as certain additional information will be required depending on the industry sector. Therefore, this should be used as a guide only to assist you in preparing for a transaction.
FINANCIALS (USE YOUR ACCOUNTANT)
1. Profit and Loss Account
1. The company’s Profit and Loss Account going back as far as possible, preferably 5 years
2. Company tax returns going back as far as possible but a minimum of 3 years
3. Comparative report outlining all Income and Expense items from one year to the next. This will an item by item comparison (eg in Advertising costs) from one year to the next.
4. Projected Profit and Loss Accounts if any available.
1. List of sales by customer for the current year and prior year.
2. Sales policies and credit terms.
3. Discount/pricing structure
4. Sales Report by sales rep including details of their performance for the year to date
1. Copy of current Marketing Plan if available
2. Detailed commentary on the MP-results of each campaign, costs, business generated, etc.
3. Copy of all company marketing materials
4. Any current year reports from sales/marketing employees on marketing activity and suggestions for the future
1. Organisational Chart outlining the reporting lines
2. For each employee,
a. a Job Description,
b. details of the compensation (itemised between salary, bonus, non financial compensation such as car allowance, expense account, etc.),
c. years of service,
d. and details of any with commitments or promises made to any of them (e.g. future bonuses, share options or cash payments)
3. Copies of any Employee Contracts
4. Copies of any Consulting Agreements
5. Employee files with memos for any disciplinary action or warnings if any
6. Listing of any labour disputes, work stoppages, or any other related issues (pending, considered or otherwise)
7. Copy of Employee Benefit Schemes (e,g. medical, pension etc)
8. Summary of company incentive plans, including profit sharing if any
9. Confidentiality Agreements if any
2. The Balance Sheet
1. A copy of the Balance Sheet going back several years, preferably 5
2. A copy of the most recent Balance Sheet from the Management accounts
1. If freehold, a copy of the most recent valuation
2. If leasehold, a copy of the lease agreement
3. Details of any improvements carried out in the last 3 years.
MACHINERY, FURNITURE AND EQUIPMENT
1. Listing of all items
2. Valuation report
3. Depreciation schedule indicating accumulated and remaining
4. Lease contracts, including monthly repayments and term remaining
5. Details of any maintenance contracts in place
DEBTORS (Accounts Receivable)
1. Summary of the amounts due from all customers, employees or any other party.
2. Detailed Aged listing of balances due by each customer for the current period and at last year end date.
3. Details of any bad debt provisions made in the current or last financial year.
4. Copies of customer invoices, lodgement books and bank statements for the current year.
STOCK AND WIP
1. Stock and WIP Report, by item
2. Sales report by item for the past 12 months
3. Details of how often stock is counted, and by whom.
4. Confirmation of the basis of valuation of stock and WIP.
5. Details of any obsolete stock.
1. Copies of all bank statements for the past 3 years
2. Documentation on any existing loan or overdraft facilities (including rate of interest, loan terms, annual repayments and security held)
3. Listing of all company bank accounts, numbers, institution and account signees.
1. Summary of amounts owed to third parties or the directors for the current year and last financial year end.
2. Aged analysis of the current trade creditors listing.
3. Details of credit terms received from suppliers.
4. Supplier statements for the current year, and details of any reconciling items.
5. Details of all amounts due to the Revenue, including VAT, PAYE/PRSI and CT, including dates.
6. Details of any payment plans entered into with any suppliers including the Revenue Commissioners.
7. Letter/Documentation from any other parties to whom you are obligated financially (eg staff or family loans)
1. Contracts for any equipment leases, maintenance contracts
2. Software manuals (where available)
3. Website access, pass code (when purchase completed)
4. Copies of all reports currently being produced
5. Copies of any professional accreditation (e.g. ISO etc) documentation
1. All competitor marketing materials available
2. Listing of all major competitors, phone numbers and website address, profiles
1. Copies of all contracts in the following categories:
2. Insurance Policies
3. Customer Contracts
4. Supplier Contracts
If these are not all readily available, at a minimum, provide details of the contract term, expiry date and relevant third party contact name.
LEGAL AND CORPORATE (USE YOUR SOLICITOR)
1. Copy of company minute books
2. Incorporation documents (Memo and Arts, Cert of Incorporation, Reg. of Business Name etc)
3. Copies of all documents related to any ongoing or potential legal proceeding
4. Copies of any contracts with suppliers, customers or partners (see Contract section above)
5. Copies of any trademarks, patents, license agreements etc