Compliance Due Diligence Checklist

This Compliance Due Diligence checklist will give you a stronger assurance you will not make a mistake when buying a business and will provide you with an overview of all the considerations and risks before going through the M&A process.

Why is the Compliance Due Diligence Checklist so Effective?

  • It gives you a stronger assurance that you will not make a mistake when buying a business
  • It provides you with an overview of the considerations and risks before going through a merger or acquisitions process
  • It outlines practical steps and tips for how to thoroughly check the targeted business
  • It provides executives with the security that employees will know what to do when the time comes for merging or buying another company
  • It empowers you so you can avoid serious financial or credential consequences

Steps To Take Before the Acquisition

Before starting the whole acquisition process, the buy-side needs to form an M&A team that will know exactly what to do pre-acquisition.

It's crucial not to avoid taking a deep and complex look into the targeted company; namely its financial records and data.

  • Explain to your team why is it so important to complete compliance due diligence
  • Train this team to ask as many questions as possible about the target’s business functionality
  • Even if it seems that the company you are buying or merging with does not have any “issues”, be sure to check everything
  • Consider, ask, and examine the possible complications that could emerge after buying the company
  • Allocate the resources accordingly for this task
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Why is the Compliance Due Diligence Checklist so Effective?

  • It gives you a stronger assurance that you will not make a mistake when buying a business
  • It provides you with an overview of the considerations and risks before going through a merger or acquisitions process
  • It outlines practical steps and tips for how to thoroughly check the targeted business
  • It provides executives with the security that employees will know what to do when the time comes for merging or buying another company
  • It empowers you so you can avoid serious financial or credential consequences

Steps To Take Before the Acquisition

Before starting the whole acquisition process, the buy-side needs to form an M&A team that will know exactly what to do pre-acquisition.

It's crucial not to avoid taking a deep and complex look into the targeted company; namely its financial records and data.

  • Explain to your team why is it so important to complete compliance due diligence
  • Train this team to ask as many questions as possible about the target’s business functionality
  • Even if it seems that the company you are buying or merging with does not have any “issues”, be sure to check everything
  • Consider, ask, and examine the possible complications that could emerge after buying the company
  • Allocate the resources accordingly for this task

Compliance Due Diligence Checklist

This Compliance Due Diligence checklist will give you a stronger assurance you will not make a mistake when buying a business and will provide you with an overview of all the considerations and risks before going through the M&A process.

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Why is the Compliance Due Diligence Checklist so Effective?

  • It gives you a stronger assurance that you will not make a mistake when buying a business
  • It provides you with an overview of the considerations and risks before going through a merger or acquisitions process
  • It outlines practical steps and tips for how to thoroughly check the targeted business
  • It provides executives with the security that employees will know what to do when the time comes for merging or buying another company
  • It empowers you so you can avoid serious financial or credential consequences

Steps To Take Before the Acquisition

Before starting the whole acquisition process, the buy-side needs to form an M&A team that will know exactly what to do pre-acquisition.

It's crucial not to avoid taking a deep and complex look into the targeted company; namely its financial records and data.

  • Explain to your team why is it so important to complete compliance due diligence
  • Train this team to ask as many questions as possible about the target’s business functionality
  • Even if it seems that the company you are buying or merging with does not have any “issues”, be sure to check everything
  • Consider, ask, and examine the possible complications that could emerge after buying the company
  • Allocate the resources accordingly for this task

What Tasks does the 

Compliance Due Diligence Checklist

 Include

Steps To Take Before the Acquisition

Before starting the whole acquisition process, the buy-side needs to form an M&A team that will know exactly what to do pre-acquisition.

It's crucial not to avoid taking a deep and complex look into the targeted company; namely its financial records and data.

  • Explain to your team why is it so important to complete compliance due diligence
  • Train this team to ask as many questions as possible about the target’s business functionality
  • Even if it seems that the company you are buying or merging with does not have any “issues”, be sure to check everything
  • Consider, ask, and examine the possible complications that could emerge after buying the company
  • Allocate the resources accordingly for this task

How to Complete A Successful Compliance Due Diligence

Put the main focus on uncovering the crucial information about the desired business before you start buying. Some companies may have their violations hidden, and by merging this company with yours, you can become responsible for these violations. Compliance due diligence can help you avoid these M&A pitfalls. Specifically to have a successful compliance due diligence, follow these steps:

  • Have a defined compliance risk profile set for the target company
  • Make sure that the business you are buying did not violate any anti-bribery laws
  • Check if the data protection rules have been implemented in the ethics of this company, and if they were, make sure that these rules have been respected and followed
  • Ensure the trade regulations of the target company are respected
  • Think in advance about the consequences of the specific issues you come across, and figure out their potential long term impacts on your current company
  • If you are not sure about the last point, we recommend exiting the deal

General Compliance and Ethics Program

Frequently ask yourself these questions in order to conduct a solid background check and an initial report on the target business:

  • Does the company have a code of ethics?
  • Does the target company offer opportunities for it's employees to ask questions or inquire about their current work?
  • Do the employees have the option of making a report to HR, and if yes, can they do it anonymously?
  • Has the company ever conducted a risk assessment report?
  • Does the company have publicly available financial records?
  • Does the company keep its data in safe storage?
  • Does the business conduct file back-ups on a regular basis?
  • Are any bonuses available for workers in this company?
  • Is there a summary of or copies of the monetary compensation plan?
  • How are employees in this company receiving salary payments?

Risk Factors You Should Pay Great Attention to

Along with having a team collecting data about the target’s business routines, it is very important to search for several additional risk factors that will indicate the level of risk you will be taking if you decide to start negotiations. Before that, answer these questions and consider their possible consequences:

Nature of transaction
  • What is the prime goal of my company in these negotiations?
  • What risks have been uncovered so far in the process of due diligence?
  • What is the payment method requested from my business in this deal?
Industrial risks
  • How connected is the target company’s industry to your company's industrial area?
  • Is that targeted industry regulated by the government?
Risks of this specific target company
  • Was the target considered as competition before entering into negotiations?
  • Was the target known for having issues or being financially unstable?
  • What is the target’s full business history like?

Steps to Take When Starting the Negotiations

After conducting complex research and following the compliance due diligence for pre-acquisition, there are very important steps to take when beginning negotiations. With the right allocation of resources, along with these next steps, you will be able to successfully start the buying process:

  • Determine teams, roles, and workflows on the buy-side
  • Confirm with your team and lawyers that the target company does not have any hidden problems
  • Start the negotiations
  • Submit the issue-spotting report and use it to present the red flags to the other side of the negotiations
  • Recommend a resolution (or resolutions), that your team has prepared in advance, to address the red flags
  • If there is a serious issue found, request a detailed explanation and counter plan from the selling side

Steps to Take When the Merging Process is Complete

Even after you have successfully followed the checklist and purchased the target company, there are some check-points still left to consider such as:

  • Integration of company policies and ethics and applying them on the newly purchased business
  • Remediation of issues which were discovered during the due diligence
  • Documentation of all the changes made from the start in order to make a clean and functional business

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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