Asset Purchase Due Diligence Checklist

In this checklist, we list a number of areas in which the buyer should conduct a thorough investigation to reveal any hidden issues. Included are balance sheets, cash flow statements, and income statements.

Asset Purchase Due Diligence Template

An asset purchase, much like an acquisition or merger, requires substantial due diligence on the part of the buyer to ensure there are no unpleasant surprises. More specifically, the buyer must confirm a number of issues to allow for the smooth transfer of title from seller to buyer.

Below, we’ll list a number of areas in which the buyer, or the buyer’s counsel, should conduct a thorough investigation to uncover any issues or problems concealed beneath the surface.

What Tasks Does the Asset Purchase Due Diligence Checklist Include

Financial Statements

First, the financial statements of the owning company, for the last 3 to 5 years, should be reviewed in detail. An analysis of the company’s financials with an eye towards any entries that concern the asset(s) to be purchased will reveal many of the issues that could potentially arise during an asset sale.

A review of the following financial statements is in order:

  • Balance Sheets
  • Income Statements
  • Cash Flows Statements
  • Shareholders’ Equity Statements

It should be noted, particular attention should be paid to the balance sheet, including any entries that pertain directly to the asset(s) being purchased.

Current or Pending Litigation

Legal challenges to the owner’s title to the property being sold must be thoroughly investigated and analyzed. Even a single lawsuit (or pending action) can disrupt the sale of assets. With this in mind, the buyer should request from the owner:

  • A detailed list of any litigation the owner is currently involved in
  • A list of any litigation the owner reasonably foresees he or she will become involved in
  • A list of any judgments or liens against the company or its assets

Constitutional Restrictions

Next, the founding documents of the owner (if it is a body corporate) should be reviewed in order to uncover any impediments or obstacles to the sale of the assets in question. The buyer should review:

  • The articles of incorporation of the owner of the assets
  • Any bylaws or resolutions
  • Any shareholder agreements, especially USAs (unanimous shareholder agreements)
  • The minutes of any directors or shareholder meetings

Contractual Obligations

Existing contractual obligations of the owner could create problems for the buyer if they are only discovered after the sale of an asset. To avoid this the buyer should request from the owner: a list of all agreements that bind the owner to an obligation. These include, but are not limited to, all:

  • Contracts
  • Vendor Agreements
  • Loans
  • Lines of Credit
  • Employment Agreements
  • Leases (of real and personal property)
  • Contracts of Insurance

Intellectual Property Considerations

If the asset being purchased contains creative or original work, the buyer should be on the lookout for any intellectual property considerations that may arise. The buyer should request from the owner:

  • The employment agreements of all employees who helped create the asset
  • Any patents, trademarks, trade names, or copyrights related to the asset
  • A list of employees who are essential to the maintenance and upkeep of the asset

The last item is necessary in order to allow the buyer to hire or retain mission-critical employees at the time of, or before, the closing of the sale.

Regulatory Obligations

The ownership of certain assets may trigger regulatory obligations on the part of the owner. If the buyer is concerned that the asset to be purchased may give rise to any new regulatory requirements, he or she should request from the current owner:

  • A list of any and all regulatory requirements and obligations currently owed due to ownership of the asset
  • All current business licensing requirements
  • A list of any reasonably foreseeable future regulatory requirements that may arise as a result of ownership of the asset

A buyer should also thoroughly review the regulatory regime for the industry in which the asset operates (for example, environmental regulations for oil and gas assets).

Miscellaneous Liabilities

The following items don’t fall neatly into any of the previous categories, but are considered best practices when purchasing an asset:

  • The buyer should request from the owner information regarding any outstanding tax obligations or debts, including any liens on current assets
  • The buyer should request from the owner information regarding any currently outstanding convertible debt agreements, share agreements, or other agreements allowing for a forced sale of any of the owner’s assets
  • The buyer should request from the owner a detailed list of all assets to be purchased, including an indication of fair market value and all deferred or outstanding maintenance requirements
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Asset Purchase Due Diligence Template

An asset purchase, much like an acquisition or merger, requires substantial due diligence on the part of the buyer to ensure there are no unpleasant surprises. More specifically, the buyer must confirm a number of issues to allow for the smooth transfer of title from seller to buyer.

Below, we’ll list a number of areas in which the buyer, or the buyer’s counsel, should conduct a thorough investigation to uncover any issues or problems concealed beneath the surface.

What Tasks Does the Asset Purchase Due Diligence Checklist Include

Financial Statements

First, the financial statements of the owning company, for the last 3 to 5 years, should be reviewed in detail. An analysis of the company’s financials with an eye towards any entries that concern the asset(s) to be purchased will reveal many of the issues that could potentially arise during an asset sale.

A review of the following financial statements is in order:

  • Balance Sheets
  • Income Statements
  • Cash Flows Statements
  • Shareholders’ Equity Statements

It should be noted, particular attention should be paid to the balance sheet, including any entries that pertain directly to the asset(s) being purchased.

Current or Pending Litigation

Legal challenges to the owner’s title to the property being sold must be thoroughly investigated and analyzed. Even a single lawsuit (or pending action) can disrupt the sale of assets. With this in mind, the buyer should request from the owner:

  • A detailed list of any litigation the owner is currently involved in
  • A list of any litigation the owner reasonably foresees he or she will become involved in
  • A list of any judgments or liens against the company or its assets

Constitutional Restrictions

Next, the founding documents of the owner (if it is a body corporate) should be reviewed in order to uncover any impediments or obstacles to the sale of the assets in question. The buyer should review:

  • The articles of incorporation of the owner of the assets
  • Any bylaws or resolutions
  • Any shareholder agreements, especially USAs (unanimous shareholder agreements)
  • The minutes of any directors or shareholder meetings

Contractual Obligations

Existing contractual obligations of the owner could create problems for the buyer if they are only discovered after the sale of an asset. To avoid this the buyer should request from the owner: a list of all agreements that bind the owner to an obligation. These include, but are not limited to, all:

  • Contracts
  • Vendor Agreements
  • Loans
  • Lines of Credit
  • Employment Agreements
  • Leases (of real and personal property)
  • Contracts of Insurance

Intellectual Property Considerations

If the asset being purchased contains creative or original work, the buyer should be on the lookout for any intellectual property considerations that may arise. The buyer should request from the owner:

  • The employment agreements of all employees who helped create the asset
  • Any patents, trademarks, trade names, or copyrights related to the asset
  • A list of employees who are essential to the maintenance and upkeep of the asset

The last item is necessary in order to allow the buyer to hire or retain mission-critical employees at the time of, or before, the closing of the sale.

Regulatory Obligations

The ownership of certain assets may trigger regulatory obligations on the part of the owner. If the buyer is concerned that the asset to be purchased may give rise to any new regulatory requirements, he or she should request from the current owner:

  • A list of any and all regulatory requirements and obligations currently owed due to ownership of the asset
  • All current business licensing requirements
  • A list of any reasonably foreseeable future regulatory requirements that may arise as a result of ownership of the asset

A buyer should also thoroughly review the regulatory regime for the industry in which the asset operates (for example, environmental regulations for oil and gas assets).

Miscellaneous Liabilities

The following items don’t fall neatly into any of the previous categories, but are considered best practices when purchasing an asset:

  • The buyer should request from the owner information regarding any outstanding tax obligations or debts, including any liens on current assets
  • The buyer should request from the owner information regarding any currently outstanding convertible debt agreements, share agreements, or other agreements allowing for a forced sale of any of the owner’s assets
  • The buyer should request from the owner a detailed list of all assets to be purchased, including an indication of fair market value and all deferred or outstanding maintenance requirements

Asset Purchase Due Diligence Checklist

In this checklist, we list a number of areas in which the buyer should conduct a thorough investigation to reveal any hidden issues. Included are balance sheets, cash flow statements, and income statements.

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Asset Purchase Due Diligence Template

An asset purchase, much like an acquisition or merger, requires substantial due diligence on the part of the buyer to ensure there are no unpleasant surprises. More specifically, the buyer must confirm a number of issues to allow for the smooth transfer of title from seller to buyer.

Below, we’ll list a number of areas in which the buyer, or the buyer’s counsel, should conduct a thorough investigation to uncover any issues or problems concealed beneath the surface.

What Tasks Does the Asset Purchase Due Diligence Checklist Include

Financial Statements

First, the financial statements of the owning company, for the last 3 to 5 years, should be reviewed in detail. An analysis of the company’s financials with an eye towards any entries that concern the asset(s) to be purchased will reveal many of the issues that could potentially arise during an asset sale.

A review of the following financial statements is in order:

  • Balance Sheets
  • Income Statements
  • Cash Flows Statements
  • Shareholders’ Equity Statements

It should be noted, particular attention should be paid to the balance sheet, including any entries that pertain directly to the asset(s) being purchased.

Current or Pending Litigation

Legal challenges to the owner’s title to the property being sold must be thoroughly investigated and analyzed. Even a single lawsuit (or pending action) can disrupt the sale of assets. With this in mind, the buyer should request from the owner:

  • A detailed list of any litigation the owner is currently involved in
  • A list of any litigation the owner reasonably foresees he or she will become involved in
  • A list of any judgments or liens against the company or its assets

Constitutional Restrictions

Next, the founding documents of the owner (if it is a body corporate) should be reviewed in order to uncover any impediments or obstacles to the sale of the assets in question. The buyer should review:

  • The articles of incorporation of the owner of the assets
  • Any bylaws or resolutions
  • Any shareholder agreements, especially USAs (unanimous shareholder agreements)
  • The minutes of any directors or shareholder meetings

Contractual Obligations

Existing contractual obligations of the owner could create problems for the buyer if they are only discovered after the sale of an asset. To avoid this the buyer should request from the owner: a list of all agreements that bind the owner to an obligation. These include, but are not limited to, all:

  • Contracts
  • Vendor Agreements
  • Loans
  • Lines of Credit
  • Employment Agreements
  • Leases (of real and personal property)
  • Contracts of Insurance

Intellectual Property Considerations

If the asset being purchased contains creative or original work, the buyer should be on the lookout for any intellectual property considerations that may arise. The buyer should request from the owner:

  • The employment agreements of all employees who helped create the asset
  • Any patents, trademarks, trade names, or copyrights related to the asset
  • A list of employees who are essential to the maintenance and upkeep of the asset

The last item is necessary in order to allow the buyer to hire or retain mission-critical employees at the time of, or before, the closing of the sale.

Regulatory Obligations

The ownership of certain assets may trigger regulatory obligations on the part of the owner. If the buyer is concerned that the asset to be purchased may give rise to any new regulatory requirements, he or she should request from the current owner:

  • A list of any and all regulatory requirements and obligations currently owed due to ownership of the asset
  • All current business licensing requirements
  • A list of any reasonably foreseeable future regulatory requirements that may arise as a result of ownership of the asset

A buyer should also thoroughly review the regulatory regime for the industry in which the asset operates (for example, environmental regulations for oil and gas assets).

Miscellaneous Liabilities

The following items don’t fall neatly into any of the previous categories, but are considered best practices when purchasing an asset:

  • The buyer should request from the owner information regarding any outstanding tax obligations or debts, including any liens on current assets
  • The buyer should request from the owner information regarding any currently outstanding convertible debt agreements, share agreements, or other agreements allowing for a forced sale of any of the owner’s assets
  • The buyer should request from the owner a detailed list of all assets to be purchased, including an indication of fair market value and all deferred or outstanding maintenance requirements

What Tasks does the 

Asset Purchase Due Diligence Checklist

 Include

FAQ

What Is Due Diligence?

Due diligence is a critical aspect of any deal that begins very early in the process and can continue right up until closing. During due diligence, the potential buyer asks questions and requests documentation from the seller that helps the buyer understand the target company and its business. These requests are usually general to start and become more specific as the buyer develops a greater understanding of the target. Buyers use the information provided by the seller to evaluate the opportunities and risks associated with the potential transaction. It is important for sellers to stay organized throughout the process. Buyers often submit thorough, detailed request lists that require input from numerous members of the seller’s deal team.

What is a due diligence checklist?

As the name implies, a due diligence request list is a list of questions and requests for information and documentation that a buyer submits to a seller in order to learn about the target company, its business and its operations. The initial diligence request list tends to be broad and typically includes an extensive list of questions covering a wide range of subjects. This allows the buyer to gain a broad understanding of the target company and identify key issues that can be investigated and considered more closely. Because every deal is different, due diligence request lists have to be tailored to meet the needs of the buyer and address the unique circumstances of your transaction.
However, there is a variety of fundamental requests that are relevant in most deals. These are the types of requests that our templates are designed to address.

What Questions Does the Master Due Diligence Questionnaire Include?

As the name implies, a due diligence request list is a list of questions and requests for information and documentation that a buyer submits to a seller in order to learn about the target company, its business and its operations. The initial diligence request list tends to be broad and typically includes an extensive list of questions covering a wide range of subjects. This allows the buyer to gain a broad understanding of the target company and identify key issues that can be investigated and considered more closely. Because every deal is different, due diligence request lists have to be tailored to meet the needs of the buyer and address the unique circumstances of your transaction.
However, there is a variety of fundamental requests that are relevant in most deals. These are the types of requests that our templates are designed to address.

Key considerations when using our m&a due diligence template

Our templates are drafted to provide an inclusive and wide-ranging list of initial due diligence requests. However, the templates, as well as the information contained therein, are not legal advice. They are not complete, and they are not specific to your transaction. The templates are designed to elicit general information from the seller that will provide the buyer with a broad overview of the target and it’s business and operations. You should review any template before using it, and it may need to be modified to ensure that it is suitable and relevant to your circumstances. Information provided by the seller will likely trigger additional questions that focus on specific aspects of the target’s business and issues identified during the due diligence process.

Are the requests in the template comprehensive?

No. Our Due Diligence Checklist is drafted to include typical requests that are relevant in most transactions. However, every deal and every target company is unique. Before utilizing any template, it is important that you review it with the help of your legal and other professional advisors to ensure that the requests are complete and tailored to the specific circumstances of your deal.

How to use the template with Dealroom

  • Start 14-day Free Trial of DealRoom and sign-up
  • Select a Master Due Diligence Template while creating a new room
  • Start assigning, adding to, and completing due diligence requests with needed documents by uploading them into the built-in virtual data room. The Requests tab is automatically populated with the requests from the due diligence template.

Can I change requests in this checklist or add new?

Every M&A process is different. Downloaders are urged to make these checklists their own by changing the providing information to better fit their needs.

Does this questionnaire provide all the necessary integration information?

This checklist was created by and for M&A professionals. It includes a comprehensive starting point for the integration process. However, every deal is different and may require additional requirements and tasks.

How to use this template with DealRoom?

  • Start 14-day Free Trial of DealRoom and sign-up
  • Select an Integration Template while creating a new workspace
  • Start planning, assigning, adding to, and completing integration tasks. The Requests tab is automatically populated with the tasks from the integration template.

Key considerations when using our m&a due diligence template

Our templates are drafted to provide an inclusive and wide-ranging list of initial due diligence requests. However, the templates, as well as the information contained therein, are not legal advice. They are not complete, and they are not specific to your transaction. The templates are designed to elicit general information from the seller that will provide the buyer with a broad overview of the target and it’s business and operations. You should review any template before using it, and it may need to be modified to ensure that it is suitable and relevant to your circumstances. Information provided by the seller will likely trigger additional questions that focus on specific aspects of the target’s business and issues identified during the due diligence process.

Are the requests in the template comprehensive?

No. Our Due Diligence Checklist is drafted to include typical requests that are relevant in most transactions. However, every deal and every target company is unique. Before utilizing any template, it is important that you review it with the help of your legal and other professional advisors to ensure that the requests are complete and tailored to the specific circumstances of your deal.

How to use the template with Dealroom

  • Start 14-day Free Trial of DealRoom and sign-up
  • Select a Master Due Diligence Template while creating a new room
  • Start assigning, adding to, and completing due diligence requests with needed documents by uploading them into the built-in virtual data room. The Requests tab is automatically populated with the requests from the due diligence template.

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