Due Diligence Checklist for Business Acquisitions and Mergers
The following due diligence checklist provides an organized way to learn about a company's assets, liabilities, contracts, potential problems, and risks. This is a partial list and is not intended to be so comprehensive that it covers every type of business and every situation.
1. Organization
- The Company's Articles of Incorporation, including any amendments
- The Company's Bylaws and any amendments
- The Company's minute book, including all minutes and resolutions of shareholders, directors, and executive committees
- The Company's organizational chart
- The Company's list of shareholders and the number of shares owned by each
- Copies of agreements relating to options, voting trusts, and warrants
- A Certificate of Good Standing from the Secretary of State
- A list of all states where the Company is authorized to do business
- A list of all states where the Company owns or leases property, has employees, or conducts business.
- A list of all of the Company's fictitious business name.
2. Financial Information
- Audited financial statements for the last three years, together with any auditor's reports
- The most recent unaudited financial statements, with comparable statements to the prior year.
- Auditor's letters and replies for the past five years
- Any budgets, and strategic plans.
- A schedule of all indebtedness and contingent liabilities
- A schedule of inventory
- A schedule of accounts receivable
- A schedule of accounts payable
- A description of depreciation and amortization methods and changes in accounting methods over the past five years
- The Company's general ledger
- A description of the Company's internal control procedures
3. Real Estate
- A schedule of the Company's business locations
- Copies of all real estate leases, mortgages, title policies, surveys, zoning approvals, variances, and use permits.
4. Other Assets
- A schedule of fixed assets and the locations
- All U.C.C. filings
- All leases of equipment
- A schedule of sales and purchases of major capital equipment during the last three years
5. Intellectual Property
- A schedule of domestic and foreign patents
- A schedule of trademarks and trade names
- A schedule of copyrights
- A description of methods used to protect trade secrets and knowledge.
- A schedule and copies of all consulting agreements, agreements regarding inventions, and licenses or assignments of intellectual property to or from the Company
- A schedule and summary of any claims or threatened claims by or against the Company regarding intellectual property.
6. Employees and Employee Benefits
- A list of employees including positions, current salaries, and bonuses paid during the last three years
- All employment, consulting, nondisclosure, and no solicitation or noncompetition agreements between the Company and any of its employees.
- Resumes of key employees
- The Company's personnel handbook and a schedule of all employee benefits and holiday, vacation, and sick leave policies.
- Summary plan descriptions of qualified and non-qualified retirement plans
- Copies of collective bargaining agreements, if any.
- A description of all employee complaints within the last three years, including alleged wrongful termination, harassment, and discrimination complaints.
- A description of any labor disputes, requests for arbitration, or grievance procedures currently pending or settled within the last three years.
- A list and description of benefits of all employee health and welfare insurance policies or self-funded arrangements.
- A description of the worker's compensation claim history
- A description of unemployment insurance claims history
- Copies of all stock option and stock purchase plans and a schedule of grants thereunder
7. Licenses and Permits
- Copies of any governmental licenses, permits or consents
- Any correspondence or documents relating to any proceedings of any regulatory agency.
8. Environmental Issues
- Environmental audits, if any, for each property leased by the Company.
- A listing of hazardous substances used in the Company's operations, if any.
- A list of environmental permits and licenses
- Copies of all correspondence, notices, and files related to EPA, state, or local regulatory agencies
- A list identifying and describing any environmental litigation or investigations
- A list identifying and describing any known superfund exposure
- A list identifying and describing any contingent environmental liabilities or continuing indemnification obligations
9. Taxes and Tax Returns
- Federal, state, local, and foreign income tax returns for the last three years
- State sales tax returns for the last three years
- Any audit and revenue agency reports
- Any tax settlement documents for the last three years
- Employment tax filings for the last three years
- Excise tax filings for the last three years
- Any tax liens
10. Contracts
- A schedule of all subsidiary, partnership, or joint venture relationships and obligations, with copies of all related agreements.
- Copies of all contracts between the Company and any officers, directors, five percent shareholders or affiliates.
- All loan agreements, bank financing arrangements, lines of credit, or promissory notes to which the Company is a party.
- All security agreements, mortgages, indentures, collateral pledges, and similar agreements.
- All guarantees to which the Company is a party
- Any installment sale agreements
- Any distribution agreements, sales representative agreements, marketing agreements, and supply agreements.
- Any letters of intent, contracts, and closing transcripts from any mergers, acquisitions, or divestitures within the last five years.
- Any options and stock purchase agreements involving interests in other companies
- The Company's standard quote, purchase order, invoice, and warranty forms.
- All nondisclosure or noncompetition agreements to which the Company is a party.
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