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Due Diligence

The due diligence process is often difficult and challenging. You will be asked to provide a great deal of corporate and personal information— information you may have considered private and confidential that must now be disclosed.

The reason for due diligence is simple: buyers are making a serious investment. It’s only prudent that they determine that they are not exposing themselves to unnecessary risk.

Mitigating the Due Diligence Process

Although we can’t control the amount of information the buyer requests, we take steps to ensure that the due diligence procedures don’t exhaust you and cause you more stress than necessary.

We impose strict deadlines on the buyer for conducting the due diligence process to prevent the buyer’s lawyer and accountant from dragging it out. We also address most issues on your behalf, or with your accountant, so you don’t have to be deeply involved.

Due Diligence Checklist

While requirements vary from buyer to buyer, the following due diligence checklist will give you a good idea of the information you will likely be asked to provide:

Corporate Documents

  • Organizational chart
  • Article of incorporation and corporate bylaws
  • Minute book
  • List of shareholders and shareholdings
  • List of officers and directors
  • All shareholder agreements
  • Dividends and distributions paid in past 3-5 years

Financial

  • Financial statements for past 3-5 fiscal years
  • Current year in-house financial statement
  • Accounting policies and procedures
  • Analysis of direct labour
  • Analysis of subcontractors and suppliers
  • Fixed asset and depreciation schedules
  • Additions and disposals in past 1-3 years
  • Analysis of accounts receivable and bad debts
  • Analysis of accounts payable and accrued liabilities
  • Details of any intercompany or related party transactions

Taxes

  • Federal and provincial tax returns for past 3-5 years
  • Copies of notices of assessment and reassessment for past 3-5 years
  • Copies of payroll tax filings for past 3-5 years
  • Tax and payroll audit reports for past 3-5 years

Financing

  • Bank accounts and numbers
  • Loans to or from officers, directors, and shareholders
  • All company debts and obligations
  • Assets pledged as collateral
  • List and description of all company leases
  • Liens and other interests in property owned by company
  • Letters of credit, bank guarantees

Regulatory

  • Licenses, permits, and approvals
  • Pending or resolved enforcement actions
  • Environmental permits, testing, requirements, and compliance

Employees

  • Employee list, including names, titles, and compensation
  • Employment or consulting agreements
  • Union contracts
  • Details of all employee benefit plans
  • Confidentiality and non-competition agreements
  • Employee bonus plans and deferred compensation agreements
  • Policy and procedures manuals
  • Safety plan and manual
  • Workers compensation experience and details for past 1-3 years

Operations

  • Business and marketing plan review
  • Work in progress and project/job backlog

Contracts

  • Clients
  • Suppliers and sub-contractors
  • Purchases and leases
  • Purchase order and invoice standard forms
  • Maintenance or service agreements
  • Computer software/hardware

Legal Matters

  • Past, pending, and threatened claims or suits
  • Judgments, convictions, or fines against company, officers, directors, or employees
  • Past, pending, and threatened government investigations

Information Technology

  • All computer hardware and software used
  • Service and maintenance contracts
  • Domain names, websites, hosting, and server location

Intellectual Property

  • All patents, trademarks, trade names, and copyrights
  • Licensing agreements

Insurance

  • Copies of all property, auto, liability, directors/officers, key-person
  • Pending claims
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