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This sample due diligence list is NOT TO BE USED AS AN ACTUAL DUE DILIGENCE LIST. Its purpose is to act as a guide in creating a due diligence list for acquisition of a particular business. Click here to view a printable version of this 8 page due diligence list.
G. RECEIVABLES
For accounts receivable, review:
1. Analysis of total receivables due from customers, officers, employees and others
2. Aged trial balance of receivable accounts above; compare them to aging percentages for previous years and determine any trends, seasonality, etc.
3. Terms of sale
4. Number of customers
5. Names of large customers and amount of annual sales to each by product line; determine any special arrangements with any of these customers
6. Credit policies and comment on the effectiveness of credit department and significance of credit limits
7. Turnover data
Determine collectibility of receivables and adequacy of loss reserves.
Determine if receivables are discounted or pledged as collateral for borrowings.
H. LIABILITIES
Determine if any assets are pledged as collateral.
Determine if the Company's is in compliance with loan covenants.
Review details about all financial liabilities, recorded or contingent, including the general terms of all notes, bonds and mortgages with particular reference to personal guarantees and accelerated maturity upon change of control.
Determine contingent liabilities such as:
1. Contracts and agreements
2. Price re-determination or renegotiations
3. Sales subject to service and warranty guarantees
4. Product liability
5. Unfunded past service costs of pension plans or unfunded retirement benefits.
With respect to accounts payable, review an analysis of payables by type (vendor, taxes, payroll, etc.) and determine payment practices for each.
I. BUDGETS AND FORECASTS
Determine the budgeting process, including capital budgeting, if applicable.
For each of the next three years (calendar or fiscal years ended), determine consolidated projections and separate business unit projections, on a quarterly basis, including:
1. Income statements, balance sheets and cash flow statements
2. Underlying assumptions including product/service introductions, market size, market share, pricing, volumes, discounts, ramp-up costs, etc.
3. Underlying assumptions for all major expense and capital expenditures, particularly R&D software development
Determine the amortization policy for any prepaid expenses or deferred charges.
Determine how goodwill or other intangibles arose and how they are being amortized. Determine any issues regarding the "going concern value".
Review details regarding the important metrics which management uses to run the Company (capacity utilization, sales per person, bench time, etc.). Review comparisons of these metrics for the past three years.
Determine how the Company's metrics compare with the industry in general, and with peers/competitors.
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For additional information regarding Due Diligence, contact a Business Team broker or use our buying a business or selling a business online forms. |
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