MERGERS & ACQUISITIONS: CHECKLIST FOR BUYERS Presented by Polley Insurance and Risk Management Date:
Review conducted by:
When considering a merger or acquisition, it is imperative that you perform due diligence on the company being acquired in order to get the most accurate representation of the company. Knowing as many details as possible, knowing where to go to find those details and asking the right questions will help you stay on top of current and potential risks associated with taking on the company.
This document is not meant to replace legal counsel in the event of a merger or acquisition; it is merely a starting point of factors to evaluate. Not all factors have been covered here and because of that, an additional evaluation may need to be conducted.
General YES
NO
Letter of intent and definitive agreement
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Notes from all Board of Directors’ meetings within the last five years
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List of jurisdictions in which the company is registered to do business
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Locations of company offices and remote staff
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Names under which the company has done business
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Past ownership records, including previous mergers, acquisitions and/or changes in control
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Stock certificates and the stock transfer ledger
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Marketing collateral for company: labels, packing, advertising and promotional materials for products and services
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Business relationships and partner contracts
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Shareholder contracts
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COMMENTS
This checklist is merely a guideline. It is neither meant to be exhaustive nor meant to be construed as legal advice. It does not address all potential compliance issues with federal, state or local standards. Consult your licensed commercial property and casualty representative at Polley Insurance and Risk Management or legal counsel to address possible compliance requirements. © 2014, 2019 Zywave, Inc. All rights reserved.
MERGERS & ACQUISITIONS: CHECKLIST FOR BUYERS
Logistics contracts
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Powers of attorney
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Material supply or requirement contracts
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Government contracts
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Records of oral agreements
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Financial ACCOUNTING
YES
NO
Most recent financial statements
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Accounting policies and records of any changes made to policies within the past five years
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Bank account Information
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Any records of bad debts or agreements
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Record of any contingent liabilities not disclosed in financial statements
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Debit and any outstanding balances
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Any monetary reserves
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Any outstanding debt
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Records of borrowings by the company
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REVENUE
YES
NO
Revenue policies
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Record of significant sales discounts given to customers
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Analysis of revenue, gross margins and operating income trends
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Analysis of seasonal revenue change
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COMMENTS
COMMENTS
MERGERS & ACQUISITIONS: CHECKLIST FOR BUYERS
Collection process
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COST OF SALES
YES
NO
Trends in cost of services
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Analysis of how inventory accounting affects cost of goods sold
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Cost build-up of operations
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Trends in key categories of controllable and non-controllable expenses
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TAXES
YES
NO
Tax returns for the past ___ years
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Information regarding any pending tax matters
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Record of communication between company and tax authority
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Audit reports
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Proof that all taxes have been paid
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BALANCE SHEET
YES
NO
Cash management controls
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Accounts receivable
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Recent claims collection rates
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Inventory costing system
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Schedule for taking inventory
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Accounting for inventory reserves
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Inventory aging
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Schedule of fixed assets
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COMMENTS
COMMENTS
COMMENTS
MERGERS & ACQUISITIONS: CHECKLIST FOR BUYERS
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LABOR AND PERSONNEL
YES
NO
Resumes, salaries, benefits and length of service for all officers and directors and other key employees
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List of temporary or part-time employees
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List of any criminal proceedings or civil litigation of employees
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Indemnification agreements of officers or directors
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Employee manuals, handbooks, relations policies, training, agreements and procedures
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Unwritten employee policies
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Workers compensation claim details
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Labor union information
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Absenteeism, disciplinary actions, accidents and turnover rates of employees for the past ____ years
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Organization charts
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Policy manuals
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Employee handbook
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Employee contracts
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PAYROLL AND BENEFITS
YES
NO
Total employee costs
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Benefits packages for employees
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Pension plans
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Depreciation policies
Labor and Personnel COMMENTS
COMMENTS
MERGERS & ACQUISITIONS: CHECKLIST FOR BUYERS
Severance policies
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Non-salary benefits
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OPERATING INFORMATION
YES
NO
Markets the company serves
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Market size for major products
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Lists of top competitors
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Company’s current marketing strategy
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Current and past market research
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List of products or services the company has sold or supplied in the past ___ years
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Historical sales records of products and services
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Production capabilities
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Current price list for products and services
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Backlog or plans for products
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Quality assurance practices
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Content in the company’s warranty agreements, purchase orders, invoices and vendor and customer agreements
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CUSTOMERS AND VENDORS
YES
NO
Top vendors
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List of all customers
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Relationships with current vendors suppliers
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Customer contracts
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Customers and Vendors COMMENTS
COMMENTS
MERGERS & ACQUISITIONS: CHECKLIST FOR BUYERS
Vendor contracts
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Key materials required by company for operation
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RISK MANAGEMENT
YES
NO
Disaster recovery plans
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Information security policy
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LIABILITIES
YES
NO
Schedule of credit agreements, credit lines, letters of credit
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Correspondence between the company and lenders during the past ___ years
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List of accrued liabilities
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LITIGATION
YES
NO
Any laws, regulations, rules or ordinances that the company has received notice of possible noncompliance with
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All notices and reports of violation or infringement of government regulation by the company
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Any letters from lawyers pertaining to any litigation or legal proceedings in the past ___ years
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Schedule of all licences, permits, registrations and clearances obtained by the company
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Risk Management COMMENTS
COMMENTS
COMMENTS
MERGERS & ACQUISITIONS: CHECKLIST FOR BUYERS
INSURANCE
YES
NO
List of insurance coverage
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Loss and claims records for the past ___ years
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Any potential uninsured or underinsured risks
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Changes in coverage within the last ___ years
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Up to date records of actuarial evaluations
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ENVIRONMENTAL
YES
NO
Record of compliance with all federal and provincial environmental regulations
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Record of process for storing and disposing of hazardous materials
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Past or current remediation efforts
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Environmental permits
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PHYSICAL PROPERTY
YES
NO
List of all offices, manufacturing or warehouse
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Schedule of equipment and office leases
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Deeds of all owned real estate
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All leases
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All engineering reports on property
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List of security deposits being held
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Zoning status
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COMMENTS
COMMENTS
Physical and Intellectual Property COMMENTS
MERGERS & ACQUISITIONS: CHECKLIST FOR BUYERS
Legal description of all properties owned or used by the company
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Mortgages and leases of personal property
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Any restrictions affecting property
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INTELLECTUAL PROPERTY
YES
NO
List of all technology, inventions, patents, designs, trademarks, trade names and copyrights
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List of any intellectual property searches
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All agreements involving licensing, assigning or granting rights or ownership to a third party
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Any royalty agreements
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Documentation of any disputes regarding intellectual property
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Summary of computer software and databases
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IP rights, confidentiality agreements and nondisclosure agreements
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List of Internet sites
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IT assets owned or leased by the company
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Applications used to run HR, accounting, customer service, email/fax/mobile
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Software and hardware management
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Technological infrastructure
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IT policies and procedures
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COMMENTS