Nonprofit Merger Due Diligence Playbook

Merging two nonprofits can be a mutually-beneficial way to expand services and solve operating issues. However, conducting the right due diligence before entering into the process is key. Don’t leave any stone unturned with our nonprofit merger diligence template. Book a playbook demo to explore — schedule a call with us and we will reach out to help you get started.

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Due Diligence

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 Playbook

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

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?

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

Are the requests in the template comprehensive?

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 Playbook

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This template comes with Single Project plan and above

Automate your process today with this M&A checklist.

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Requests

Documents

Groups

Analytics

Overview

Progress

Timeline

Filter

All Requests

Export

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

Prepare for your due diligence

DealRoom’s nonprofit due diligence template is designed to help teams have an efficient due diligence process from the beginning. By providing your team with a pre-made professional diligence checklist, you can get a jump start on fulfilling diligence requests.

The template can act as a guide for common diligence requests categories such as legal, financial, HR, IT, commercial and more. And when you use a diligence tracker inside DealRoom, everything will be in one centralized space.