The Perkins Law team is seeing a lot of small business acquisition activity in the RVA business community – a great sign for the local economy. The challenge for buyers is how to most efficiently allocate time, energy, and expense to evaluate small business acquisition opportunities. After all, some level of due diligence is critical for a buyer to understand a company’s value (its assets, liabilities, and risks) and be in a position to make something resembling an informed purchase decision no matter how small or large the purchase price. The challenge is determining how much due diligence is enough (and at what cost). Every deal is different, so there is no universal list of questions that will guarantee a successful acquisition. Nonetheless, set forth below is a simplified due diligence list to provide a basic framework for a small business acquisition. Contact us anytime to discuss your small business formation, acquisition, or sale plans. We’re happy to help you navigate, structure, and document an efficient and cost-effective transaction.
SAMPLE SMALL BUSINESS DUE DILIGENCE CHECKLIST
Listed below are requested documents and information we would like to review relating to the proposed acquisition of assets of [insert name of seller’s company] (the “Company”).
Please provide for the Company (and any predecessor and subsidiary of the Company) all of the documents and information requested below with respect to the Company.
Please reference document submissions according to the outline numbers contained herein. We understand that there may be no documents relevant to some items on the attached checklist; please write “none” next to any such items.
Thank you for your assistance with this process.
- Financial statements for the Company for the last three fiscal years and current
year to date (through _______________, 2015).
- Monthly internal financial statements for the last six months.
- Bank statements for last full fiscal year and year to date.
- All supporting schedules for the financial statements.
- Aged accounts payable list.
- Schedule of debt (including capital leases), including amounts, maturities and
- All documents purporting to create liens, mortgages, security agreements,
pledges, charges or other encumbrances on the stock/membership interests of the Company, on any real or personal property of the Company or in favor of the Company. Copies of all Uniform Commercial Code (UCC) financing statements filed with respect to the above.
- Copies of notes payable to or notes receivable from any employee, director, affiliate, agent or owner of the Company outstanding at any time during the past year. Copies of all other agreements relating, directly or indirectly, to the Company and involving any person who is, or is proposed to become, an owner, manager, officer, director, or key employee of the Company (including loans, leases, purchases and sales of property).
- Customer list (by revenue).
- Copies of all federal, state and local income, sales and use tax returns
(together with exhibits and schedules thereto) for the last two years.
- Copies of any relevant letter ruling or legal or accounting opinions relating to tax
- List and briefly describe any tax audits of the Company during the preceding five
years, together with copies of revenue agents’ reports, correspondence, etc.
relating to any such federal, state or local proceedings.
- List and description of all real property owned or leased by the Company.
- Copies of deeds, title insurance policies, appraisals and environmental reports
relating to any parcel of property owned by the Company.
- Copies of all real estate leases, purchase agreements, and options to which the Company is a party.
- A list of all current commitments by the Company to purchase any fixed assets
(e.g., furniture, fixtures, equipment, etc.).
- All written contracts entered into by the Company, any vendor agreements, lease agreements (both personal property and real property), employment agreements, severance agreements, consulting agreements, confidentiality agreements, and indemnification agreements.
- List of all contracts or agreements containing termination or other provisions
triggered by a sale of business assets or change in control of the Company.
- Schedule summarizing insurance policies, including type of coverage, extent of
coverage, deductibles, annual premiums, and loss experience.
- A list and brief description of all insurance claims and/or incident reports filed by
the Company with any of its insurers in the last 18 months.
- Copies of any licenses or permits necessary for the conduct of the Company’s business.
- A list and brief description of each threatened or pending claim or litigation to
which the Company is a party (whether as a plaintiff or defendant), including
copies of all significant pleadings and correspondence, including but not limited
to (a) alleged violations of laws or regulations regarding the health or safety of
employees or others or other laws or regulations, or (b) other governmental or
- Orders, judgments or decrees of courts, governmental authorities or arbitration
tribunals to which the Company is bound.
- Identify the software programs the Company uses for its business operations and financial accounting needs. Has the software been updated to its current version? Has the software been changed or modified during the year? Please provide a copy of the license agreements for all such software.
- List of employees and their employment records
- Copy of Employee Handbook or description of all employment policies and procedures (e.g., vacation and sick leave)