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Due Diligence Checklist

 

Due Diligence Checklist for Business Acquisition

Financial Documents

  • Last three years' business tax returns (federal and state)

  • Federal and state payroll tax filings

  • General Ledger detail for the trailing twelve months (TTM) and two preceding fiscal years

  • Year-to-date (YTD) Profit and Loss Statement (P&L)

  • Year-to-date (YTD) Balance Sheet (BS)

  • Schedule of all management proposed SDE/EBITDA adjustments, with supporting documentation for the TTM and two preceding fiscal years

Operational Documents

  • Monthly sales and purchases reports for TTM and two preceding calendar years

  • Copies of monthly bank statements for TTM for all active bank accounts

  • Detailed schedule of sales and gross profit by room-type or product/service for the TTM and two preceding fiscal years

Legal Documents

  • Copy of current lease agreements with landlords

  • Contracts with key suppliers and major customers

  • Any legal settlements or ongoing litigation documents

  • Compliance and regulatory documentation specific to the industry

  • Article: Why You Need a Mergers & Acquisitions Attorney

Human Resources

  • A copy of the most current organizational chart

  • Employment agreements and contracts for key staff

  • Reports of commissions paid to 1099 sales agents for TTM and two preceding fiscal years

Accounts Management

  • Accounts receivable aging report, detailed by customer and invoice

  • Accounts payable aging report, detailed by vendor and invoice, as of year-end for the TTM and two preceding fiscal years

  • Inventory lists and valuations (if applicable)

Additional Records

  • Minutes from board meetings and shareholder meetings over the past three years

  • Any intellectual property registrations or disputes

  • Information technology (IT) systems and network architecture overview

  • Environmental, health, and safety audits

Market and Competitive Position

  • Analysis of market trends and business's competitive position

  • Customer and supplier concentration analysis

  • Marketing strategies and sales forecasts

This checklist covers a broad spectrum of the documents and information that should be reviewed during the due diligence process. It's designed to be comprehensive but may need adjustments based on the specific industry, size, and location of the business involved in the transaction.

Additional resources for both buyers and sellers can be found below;