Nonprofit Merger Due Diligence Checklist

There comes a time in every nonprofit organization’s life span when the board of the organization decides whether it’s profitable to enter merging negotiations.

Nonprofit Merger Due Diligence

There comes a time in every nonprofit organization’s life span when the board of the organization decides whether it’s profitable to enter merging negotiations.

Merging of two nonprofit organizations can in most cases benefit both of them, enabling easier business conducting and a whole list of highlights and improvements.

Although some businessman finds merging as the last business resort, when it comes to nonprofit organizations it can solve serious operating issues such as being under-capitalized, cost reduction, operating on a higher nonprofit business level. In most cases, by merging the two nonprofit organizations, both boards agree on dissolving the previous business and forming a new one.

The new board of directors will decide on whether there is a need for assets from the dissolved organizations. Merging with another nonprofit could be very effective, but it is also crucial to conduct the right Due Diligence before entering the merging process.

By undergoing this process, the board will have a clear insight into the merging company’s items of interest, while it will also significantly improve the speed of the merging by providing the necessary documentation for a review. The nonprofit merger Due Diligence should be done by thoroughly inspecting several important business categories and combining the knowledge acquired from each.

Download Template
Start Due Diligence With DealRoom
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Nonprofit Merger Due Diligence

There comes a time in every nonprofit organization’s life span when the board of the organization decides whether it’s profitable to enter merging negotiations.

Merging of two nonprofit organizations can in most cases benefit both of them, enabling easier business conducting and a whole list of highlights and improvements.

Although some businessman finds merging as the last business resort, when it comes to nonprofit organizations it can solve serious operating issues such as being under-capitalized, cost reduction, operating on a higher nonprofit business level. In most cases, by merging the two nonprofit organizations, both boards agree on dissolving the previous business and forming a new one.

The new board of directors will decide on whether there is a need for assets from the dissolved organizations. Merging with another nonprofit could be very effective, but it is also crucial to conduct the right Due Diligence before entering the merging process.

By undergoing this process, the board will have a clear insight into the merging company’s items of interest, while it will also significantly improve the speed of the merging by providing the necessary documentation for a review. The nonprofit merger Due Diligence should be done by thoroughly inspecting several important business categories and combining the knowledge acquired from each.

Nonprofit Merger Due Diligence Checklist

There comes a time in every nonprofit organization’s life span when the board of the organization decides whether it’s profitable to enter merging negotiations.

Download Template
Start Due Diligence With DealRoom
Start Integration With DealRoom

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Nonprofit Merger Due Diligence

There comes a time in every nonprofit organization’s life span when the board of the organization decides whether it’s profitable to enter merging negotiations.

Merging of two nonprofit organizations can in most cases benefit both of them, enabling easier business conducting and a whole list of highlights and improvements.

Although some businessman finds merging as the last business resort, when it comes to nonprofit organizations it can solve serious operating issues such as being under-capitalized, cost reduction, operating on a higher nonprofit business level. In most cases, by merging the two nonprofit organizations, both boards agree on dissolving the previous business and forming a new one.

The new board of directors will decide on whether there is a need for assets from the dissolved organizations. Merging with another nonprofit could be very effective, but it is also crucial to conduct the right Due Diligence before entering the merging process.

By undergoing this process, the board will have a clear insight into the merging company’s items of interest, while it will also significantly improve the speed of the merging by providing the necessary documentation for a review. The nonprofit merger Due Diligence should be done by thoroughly inspecting several important business categories and combining the knowledge acquired from each.

What Tasks does the 

Nonprofit Merger Due Diligence Checklist

 Include

Organizational Items

  • Organizational chart of the company, containing all the necessary business organization documents and Board of Directors of the company
  • Structural operating of the company audit, with the employee list and their tasks and benefits in the organization
  • Organization’s Article of Incorporation and all the required business permissions issued by the state where the company was founded and is doing business in
  • Business permissions issued by the states where the company is doing business in
  • Form 990 Review policy
  • Certificate of the company’s well standing
  • Copies of the annual reports of the company for each of the previous 3 business years
  • A list of the company's benefit policies
  • A complete organizational audit of the company including copies of previous audits and results, if conducted

Financial Items

  • A description of the company’s  financial control methods
  • Amortization methods that the company was using for the last 3 business years
  • The company’s annual estimated budget and expenses for the last 3 business years
  • A graphic showing contingent liabilities of the firm
  • Copies of all previously conducted financial audits of the company, in case they were conducted for the last 3 business years
  • A description of the company’s accounting methods and strategies
  • A list of the company's fixed and variable expenses for the last 3 business years
  • A description of the firm’s current credit and debt records included detailed information regarding transactions
  • Summary of the company’s investment policies including the comments of financial analysts
  • Copies of account standings of the organization for both federal and foreign bank accounts

Legal and Tax Items

  • Copies of the previously conducted legal audits for the review, if conducted during the last 3 business years
  • A list of all the legal permissions of the organization enabling it to operate both on the federal and foreign level
  • Summary of the legal auditor's comments regarding legal aspects of the company
  • Information regarding all existing and prior legal litigations and court processes that the company was involved in
  • Copies of all the company’s insurance rights and protocols, warranties and employee insurances
  • Copies of all the company's general, personal and product liability, worker compensations, and
  • Copies of all business contracts related to the current business operations of the company
  • A list of all the restrictions or termination rights of the company
  • Partnership agreement details for each of the company’s confirmed business partners
  • Business associates contracts with details
  • Copies of the contract details considering the company’s sales and services
  • Documentation of the company related tax information and tax-paying methods
  • A list of all federal and local tax returns with details
  • Company’s coordination with the state tax authority  information
  • Information regarding tax filings of the company’s employees
  • Tax forms 990 of the company

Human Resources Items

  • A copy of the full Employee list of the company including staff and Board of Directors information
  • A description of selective methods used when hiring employees for each position in the company
  • A description of methods used for choosing or promoting board members of the company
  • Employee status information of the firm, including bonuses, benefits, and insurance details
  • Copies of employee contract information for a review
  • Copies of the resumes of all relevant employees for key positions in the firm
  • Description of methods used for solving internal employee issues
  • Retirement plans that the company is applying
  • Description of sick leaves policies of the company

Real and Intellectual Property Items

  • List of all the company’s real estate or offices on lease or rent for review
  • Licenses and permits regarding material assets of the company
  • Organization’s logo or trademark details and legal protection information for each
  • Copies of all buyers agreements that the company has for the property it owns
  • An inventory list of all the company’s claimed property subjects
  • Copies of the official contracts for the firm’s real estate purchases
  • Environmental audits related to the location of the company’s property

Organizational Policy Items

  • Detailed information regarding a list of the company-applied policies in use
  • A copy of the company’s employee policies in use with details
  • A  copy of the company's governance-related policies for a review
  • Documentation regarding the company's investment and expenses policies
  • Document retention policies that the company is applying for a review
  • A copy of the company’s conflict of interest policies in use

Company’s Confidential Data Items

  • A copy and description of the company’s IT security and data security methods in use, including the details regarding security protocols
  • Copies and information regarding the organization’s data backups
  • Information regarding how often data backups were done
  • Description of the company’s data recovery methods, in case such confidential data was lost
  • A scheme of security codes held by employees on significant positions
  • A detailed report on the company anti-malware products usage
  • A list of all data-targeted attacks on the company for the previous 3 business years, if such an event occurred
  • Description of methods used in employee training for data security measures
  • Description of risk management methods applied in the company

Nonprofit Merger - the Finishing Touch

Conducting the effective Nonprofit Organization Merger Due Diligence is the only true way of understanding completely how the other Nonprofit Organization works. The categories of items listed above include some crucial points for a better understanding of the company's workforce, property items, financial well-standing and many others.

The legal aspect of the Due Diligence is meant to provide you with insurance that after the merging process is complete, no legal issues of the previous companies will follow the newly formed organization. Human resources and data security measures can also be the aspects of crucial importance for the organization of the newly formed company while providing important data on how the previous company was operating.

This list is only a first step of the Nonprofit Merger process and it will give you a clear starting point for merging into a successful company.

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.

Nonprofit Merger Due Diligence Checklist

There comes a time in every nonprofit organization’s life span when the board of the organization decides whether it’s profitable to enter merging negotiations.

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  • Organizational chart of the company, containing all the necessary business organization documents and Board of Directors of the company
  • Structural operating of the company audit, with the employee list and their tasks and benefits in the organization
  • Organization’s Article of Incorporation and all the required business permissions issued by the state where the company was founded and is doing business in
  • Business permissions issued by the states where the company is doing business in
  • Form 990 Review policy
  • Certificate of the company’s well standing
  • Copies of the annual reports of the company for each of the previous 3 business years
  • A list of the company's benefit policies
  • A complete organizational audit of the company including copies of previous audits and results, if conducted
  • A description of the company’s  financial control methods
  • Amortization methods that the company was using for the last 3 business years
  • The company’s annual estimated budget and expenses for the last 3 business years
  • A graphic showing contingent liabilities of the firm
  • Copies of all previously conducted financial audits of the company, in case they were conducted for the last 3 business years
  • A description of the company’s accounting methods and strategies
  • A list of the company's fixed and variable expenses for the last 3 business years
  • A description of the firm’s current credit and debt records included detailed information regarding transactions
  • Summary of the company’s investment policies including the comments of financial analysts
  • Copies of account standings of the organization for both federal and foreign bank accounts
  • Copies of the previously conducted legal audits for the review, if conducted during the last 3 business years
  • A list of all the legal permissions of the organization enabling it to operate both on the federal and foreign level
  • Summary of the legal auditor's comments regarding legal aspects of the company
  • Information regarding all existing and prior legal litigations and court processes that the company was involved in
  • Copies of all the company’s insurance rights and protocols, warranties and employee insurances
  • Copies of all the company's general, personal and product liability, worker compensations, and
  • Copies of all business contracts related to the current business operations of the company
  • A list of all the restrictions or termination rights of the company
  • Partnership agreement details for each of the company’s confirmed business partners
  • Business associates contracts with details
  • Copies of the contract details considering the company’s sales and services
  • Documentation of the company related tax information and tax-paying methods
  • A list of all federal and local tax returns with details
  • Company’s coordination with the state tax authority  information
  • Information regarding tax filings of the company’s employees
  • Tax forms 990 of the company
  • A copy of the full Employee list of the company including staff and Board of Directors information
  • A description of selective methods used when hiring employees for each position in the company
  • A description of methods used for choosing or promoting board members of the company
  • Employee status information of the firm, including bonuses, benefits, and insurance details
  • Copies of employee contract information for a review
  • Copies of the resumes of all relevant employees for key positions in the firm
  • Description of methods used for solving internal employee issues
  • Retirement plans that the company is applying
  • Description of sick leaves policies of the company
  • List of all the company’s real estate or offices on lease or rent for review
  • Licenses and permits regarding material assets of the company
  • Organization’s logo or trademark details and legal protection information for each
  • Copies of all buyers agreements that the company has for the property it owns
  • An inventory list of all the company’s claimed property subjects
  • Copies of the official contracts for the firm’s real estate purchases
  • Environmental audits related to the location of the company’s property
  • Detailed information regarding a list of the company-applied policies in use
  • A copy of the company’s employee policies in use with details
  • A  copy of the company's governance-related policies for a review
  • Documentation regarding the company's investment and expenses policies
  • Document retention policies that the company is applying for a review
  • A copy of the company’s conflict of interest policies in use
  • A copy and description of the company’s IT security and data security methods in use, including the details regarding security protocols
  • Copies and information regarding the organization’s data backups
  • Information regarding how often data backups were done
  • Description of the company’s data recovery methods, in case such confidential data was lost
  • A scheme of security codes held by employees on significant positions
  • A detailed report on the company anti-malware products usage
  • A list of all data-targeted attacks on the company for the previous 3 business years, if such an event occurred
  • Description of methods used in employee training for data security measures
  • Description of risk management methods applied in the company

Organizational Items

  • Organizational chart of the company, containing all the necessary business organization documents and Board of Directors of the company
  • Structural operating of the company audit, with the employee list and their tasks and benefits in the organization
  • Organization’s Article of Incorporation and all the required business permissions issued by the state where the company was founded and is doing business in
  • Business permissions issued by the states where the company is doing business in
  • Form 990 Review policy
  • Certificate of the company’s well standing
  • Copies of the annual reports of the company for each of the previous 3 business years
  • A list of the company's benefit policies
  • A complete organizational audit of the company including copies of previous audits and results, if conducted

Financial Items

  • A description of the company’s  financial control methods
  • Amortization methods that the company was using for the last 3 business years
  • The company’s annual estimated budget and expenses for the last 3 business years
  • A graphic showing contingent liabilities of the firm
  • Copies of all previously conducted financial audits of the company, in case they were conducted for the last 3 business years
  • A description of the company’s accounting methods and strategies
  • A list of the company's fixed and variable expenses for the last 3 business years
  • A description of the firm’s current credit and debt records included detailed information regarding transactions
  • Summary of the company’s investment policies including the comments of financial analysts
  • Copies of account standings of the organization for both federal and foreign bank accounts

Legal and Tax Items

  • Copies of the previously conducted legal audits for the review, if conducted during the last 3 business years
  • A list of all the legal permissions of the organization enabling it to operate both on the federal and foreign level
  • Summary of the legal auditor's comments regarding legal aspects of the company
  • Information regarding all existing and prior legal litigations and court processes that the company was involved in
  • Copies of all the company’s insurance rights and protocols, warranties and employee insurances
  • Copies of all the company's general, personal and product liability, worker compensations, and
  • Copies of all business contracts related to the current business operations of the company
  • A list of all the restrictions or termination rights of the company
  • Partnership agreement details for each of the company’s confirmed business partners
  • Business associates contracts with details
  • Copies of the contract details considering the company’s sales and services
  • Documentation of the company related tax information and tax-paying methods
  • A list of all federal and local tax returns with details
  • Company’s coordination with the state tax authority  information
  • Information regarding tax filings of the company’s employees
  • Tax forms 990 of the company

Human Resources Items

  • A copy of the full Employee list of the company including staff and Board of Directors information
  • A description of selective methods used when hiring employees for each position in the company
  • A description of methods used for choosing or promoting board members of the company
  • Employee status information of the firm, including bonuses, benefits, and insurance details
  • Copies of employee contract information for a review
  • Copies of the resumes of all relevant employees for key positions in the firm
  • Description of methods used for solving internal employee issues
  • Retirement plans that the company is applying
  • Description of sick leaves policies of the company

Real and Intellectual Property Items

  • List of all the company’s real estate or offices on lease or rent for review
  • Licenses and permits regarding material assets of the company
  • Organization’s logo or trademark details and legal protection information for each
  • Copies of all buyers agreements that the company has for the property it owns
  • An inventory list of all the company’s claimed property subjects
  • Copies of the official contracts for the firm’s real estate purchases
  • Environmental audits related to the location of the company’s property

Organizational Policy Items

  • Detailed information regarding a list of the company-applied policies in use
  • A copy of the company’s employee policies in use with details
  • A  copy of the company's governance-related policies for a review
  • Documentation regarding the company's investment and expenses policies
  • Document retention policies that the company is applying for a review
  • A copy of the company’s conflict of interest policies in use

Company’s Confidential Data Items

  • A copy and description of the company’s IT security and data security methods in use, including the details regarding security protocols
  • Copies and information regarding the organization’s data backups
  • Information regarding how often data backups were done
  • Description of the company’s data recovery methods, in case such confidential data was lost
  • A scheme of security codes held by employees on significant positions
  • A detailed report on the company anti-malware products usage
  • A list of all data-targeted attacks on the company for the previous 3 business years, if such an event occurred
  • Description of methods used in employee training for data security measures
  • Description of risk management methods applied in the company

Nonprofit Merger - the Finishing Touch

Conducting the effective Nonprofit Organization Merger Due Diligence is the only true way of understanding completely how the other Nonprofit Organization works. The categories of items listed above include some crucial points for a better understanding of the company's workforce, property items, financial well-standing and many others.

The legal aspect of the Due Diligence is meant to provide you with insurance that after the merging process is complete, no legal issues of the previous companies will follow the newly formed organization. Human resources and data security measures can also be the aspects of crucial importance for the organization of the newly formed company while providing important data on how the previous company was operating.

This list is only a first step of the Nonprofit Merger process and it will give you a clear starting point for merging into a successful company.

How DealRoom can help you execute due diligence

By using our master due diligence template, alongside DealRoom’s M&A lifecycle management software, you can create a smooth diligence process.

How DealRoom can help you execute integration

By using our integration template, alongside DealRoom's M&A lifecycle management software, you can create a smooth integration process

With this solution you’ll receive:

Professional diligence template

With requests that are specific to your transaction type. Whether you conduct sell-side or buy-side transactions, our platform allows you to add new requests as they pop up, track progress, collaborate and more.

A built-in data room

Allowing you to link corresponding documents to the diligence requests and keep all the information safe. Organize and manage your files and documents with easy drag & drop upload, 4-levels permissions, a built-in viewer, and smart notifications.

Project management capabilities

That enable your team to work together and set priorities during the diligence process. You can also invite other parties and client into the platform, set permissions, access and answer new coming requests.

Collaboration tools

To eliminate long email threads. Team members can add comments and specifically tag other users on requests to ask questions or give awareness.

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