Selling a Business Due Diligence Playbook

Selling your business can feel overwhelming! This playbook provides an in-depth look at all the documentation, research, and planning needed to prepare you for your sale.

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What Tasks does the 

Selling a Business Due Diligence Playbook

 Include

Legal

  • Review all business licenses, contracts and agreements
  • Review settled, pending and potential litigation
  • Review the company's rules, regulations and compliance plans
  • Look over budget reports and business plans
  • Verify that the seller has obtained all of the necessary business permits and licenses

Assets

  • Review the complete documentation of the company's current and fixed assets from the past five years
  • Review all accounting records, including income, balance and cash flow statements
  • Verify the accuracy of all financial statements
  • Obtain a list of all business plants, property and equipment
  • Review stock plans and agreements
  • Check the validity of accounts receivable
  • Verify the validity of all intellectual properties
  • Review past, current and potential copyright / infringement claims
  • Evaluate the efficiency of information security and technology systems

Property

  • Review the full terms and conditions of property usage
  • Obtain and review property leases
  • Collect information on company’s COBRA.
  • Conduct an inspection of all lands and properties
  • Prepare an environmental audit of the business land and property
  • Make inspections of electrical, structural, mechanical and plumbing systems of buildings
  • Evaluate the cost and efficiency of warehouse and production facilities in meeting customer demands
  • Determine the level of competitiveness with similar facilities
  • Inquire into plans for opening or closing facilities

Suppliers / Manufacturing

  • Discuss current and potential contracts with suppliers
  • Discuss current and potential contracts with manufacturers
  • Determine the storage sites of raw materials
  • Determine the methods of disposal for hazardous and non-hazardous waste
  • Review the compliance plans with local, state and national environmental laws
  • Determine the level of compliance with import / export laws
  • Discuss current and potential contracts with suppliers
  • Discuss current and potential contracts with manufacturers

Products / Inventory

  • Examine all products based on age, condition, design and functions
  • Review product plans currently in development
  • Review product warranties
  • Arrange to purchase the seller's closing inventory item by item
  • Conduct a physical audit of closing inventory

Liabilities

  • Verify that a company has filed all tax returns and paid all past and current taxes
  • Review tax returns, audits, liens and disputes from the past five years
  • Evaluate current and future changes in tax laws
  • Determine current and future tax liabilities
  • Obtain a list of past and existing creditors with the names, dates, interest charges, total amounts borrowed and due
  • Review all loan and credit agreements
  • Review active insurance contracts and policies
  • Evaluate past, current and potential insurance claims

Sales and marketing

  • Evaluate the level of competition with local, statewide and national competitors
  • Evaluate future research and development plans
  • Evaluate future industry growth and evolving marketplace trends
  • Review fluctuations in interest, inflation and economic growth
  • Review customer relationship management policies, such warranties, cancellation agreements, etc
  • Review sales contract and agreement forms
  • Evaluate the efficiency of the sales and marketing professionals
  • Determine the sales reports of all products and services

Human resources

  • Obtain a list of current employees and/or independent contractors
  • Obtain employee rules of conduct handbooks and safety policies
  • Determine which employees should stay with the company
  • Review past employee disputes and future problems
  • Review employee and/or independent contractor agreements
  • Review employee health insurance and retirement plans
  • Obtain a list of employee grievances and complaints
  • Evaluate policies about labor unions
  • Check for pending labor disputes or lawsuits
  • Review workplace accidents and/or worker's compensation claims in the past five years
  • Obtain documents and/or videos of new hire orientation and training sessions
  • Review policies about sick days, paid holidays, paid vacations and overtime pay
  • Review policies about bonuses, incentives, commissions and deferred compensation
  • Evaluate emergency training and recovery plans

Financial

  • Financial Statements - Audited
  • Financial Statements - Unaudited
  • Off-Balance Sheet Transactions
  • Contingent Liabilities
  • Prepaid Expenses
  • Audit Letters
  • Accounting Policies
  • Changes to Accounting Policies
  • Budgets
  • Projections
  • Cash Management
  • Investmet Policies
  • Hedging
  • Accounts Receivable - Aging
  • Inventory
  • Bad Debts
  • Reserves
  • Credit Support Obligations
  • Bank Statements
  • Capital Expenditures - Past

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.

Selling a Business Due Diligence Playbook

Selling your business can feel overwhelming! This playbook provides an in-depth look at all the documentation, research, and planning needed to prepare you for your sale.

Selling a Business Due Diligence Playbook

Selling your business can feel overwhelming! This playbook provides an in-depth look at all the documentation, research, and planning needed to prepare you for your sale.

Project Tristan
Requests
Documents
Groups
Analytics
Overview
Progress
Timeline
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All Requests
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  • Review all business licenses, contracts and agreements
  • Review settled, pending and potential litigation
  • Review the company's rules, regulations and compliance plans
  • Look over budget reports and business plans
  • Verify that the seller has obtained all of the necessary business permits and licenses
  • Review the complete documentation of the company's current and fixed assets from the past five years
  • Review all accounting records, including income, balance and cash flow statements
  • Verify the accuracy of all financial statements
  • Obtain a list of all business plants, property and equipment
  • Review stock plans and agreements
  • Check the validity of accounts receivable
  • Verify the validity of all intellectual properties
  • Review past, current and potential copyright / infringement claims
  • Evaluate the efficiency of information security and technology systems
  • Review the full terms and conditions of property usage
  • Obtain and review property leases
  • Collect information on company’s COBRA.
  • Conduct an inspection of all lands and properties
  • Prepare an environmental audit of the business land and property
  • Make inspections of electrical, structural, mechanical and plumbing systems of buildings
  • Evaluate the cost and efficiency of warehouse and production facilities in meeting customer demands
  • Determine the level of competitiveness with similar facilities
  • Inquire into plans for opening or closing facilities
  • Discuss current and potential contracts with suppliers
  • Discuss current and potential contracts with manufacturers
  • Determine the storage sites of raw materials
  • Determine the methods of disposal for hazardous and non-hazardous waste
  • Review the compliance plans with local, state and national environmental laws
  • Determine the level of compliance with import / export laws
  • Discuss current and potential contracts with suppliers
  • Discuss current and potential contracts with manufacturers
  • Examine all products based on age, condition, design and functions
  • Review product plans currently in development
  • Review product warranties
  • Arrange to purchase the seller's closing inventory item by item
  • Conduct a physical audit of closing inventory
  • Verify that a company has filed all tax returns and paid all past and current taxes
  • Review tax returns, audits, liens and disputes from the past five years
  • Evaluate current and future changes in tax laws
  • Determine current and future tax liabilities
  • Obtain a list of past and existing creditors with the names, dates, interest charges, total amounts borrowed and due
  • Review all loan and credit agreements
  • Review active insurance contracts and policies
  • Evaluate past, current and potential insurance claims
  • Evaluate the level of competition with local, statewide and national competitors
  • Evaluate future research and development plans
  • Evaluate future industry growth and evolving marketplace trends
  • Review fluctuations in interest, inflation and economic growth
  • Review customer relationship management policies, such warranties, cancellation agreements, etc
  • Review sales contract and agreement forms
  • Evaluate the efficiency of the sales and marketing professionals
  • Determine the sales reports of all products and services
  • Obtain a list of current employees and/or independent contractors
  • Obtain employee rules of conduct handbooks and safety policies
  • Determine which employees should stay with the company
  • Review past employee disputes and future problems
  • Review employee and/or independent contractor agreements
  • Review employee health insurance and retirement plans
  • Obtain a list of employee grievances and complaints
  • Evaluate policies about labor unions
  • Check for pending labor disputes or lawsuits
  • Review workplace accidents and/or worker's compensation claims in the past five years
  • Obtain documents and/or videos of new hire orientation and training sessions
  • Review policies about sick days, paid holidays, paid vacations and overtime pay
  • Review policies about bonuses, incentives, commissions and deferred compensation
  • Evaluate emergency training and recovery plans
  • Financial Statements - Audited
  • Financial Statements - Unaudited
  • Off-Balance Sheet Transactions
  • Contingent Liabilities
  • Prepaid Expenses
  • Audit Letters
  • Accounting Policies
  • Changes to Accounting Policies
  • Budgets
  • Projections
  • Cash Management
  • Investmet Policies
  • Hedging
  • Accounts Receivable - Aging
  • Inventory
  • Bad Debts
  • Reserves
  • Credit Support Obligations
  • Bank Statements
  • Capital Expenditures - Past

Prepare for your due diligence

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

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

Legal

  • Review all business licenses, contracts and agreements
  • Review settled, pending and potential litigation
  • Review the company's rules, regulations and compliance plans
  • Look over budget reports and business plans
  • Verify that the seller has obtained all of the necessary business permits and licenses

Assets

  • Review the complete documentation of the company's current and fixed assets from the past five years
  • Review all accounting records, including income, balance and cash flow statements
  • Verify the accuracy of all financial statements
  • Obtain a list of all business plants, property and equipment
  • Review stock plans and agreements
  • Check the validity of accounts receivable
  • Verify the validity of all intellectual properties
  • Review past, current and potential copyright / infringement claims
  • Evaluate the efficiency of information security and technology systems

Property

  • Review the full terms and conditions of property usage
  • Obtain and review property leases
  • Collect information on company’s COBRA.
  • Conduct an inspection of all lands and properties
  • Prepare an environmental audit of the business land and property
  • Make inspections of electrical, structural, mechanical and plumbing systems of buildings
  • Evaluate the cost and efficiency of warehouse and production facilities in meeting customer demands
  • Determine the level of competitiveness with similar facilities
  • Inquire into plans for opening or closing facilities

Suppliers / Manufacturing

  • Discuss current and potential contracts with suppliers
  • Discuss current and potential contracts with manufacturers
  • Determine the storage sites of raw materials
  • Determine the methods of disposal for hazardous and non-hazardous waste
  • Review the compliance plans with local, state and national environmental laws
  • Determine the level of compliance with import / export laws
  • Discuss current and potential contracts with suppliers
  • Discuss current and potential contracts with manufacturers

Products / Inventory

  • Examine all products based on age, condition, design and functions
  • Review product plans currently in development
  • Review product warranties
  • Arrange to purchase the seller's closing inventory item by item
  • Conduct a physical audit of closing inventory

Liabilities

  • Verify that a company has filed all tax returns and paid all past and current taxes
  • Review tax returns, audits, liens and disputes from the past five years
  • Evaluate current and future changes in tax laws
  • Determine current and future tax liabilities
  • Obtain a list of past and existing creditors with the names, dates, interest charges, total amounts borrowed and due
  • Review all loan and credit agreements
  • Review active insurance contracts and policies
  • Evaluate past, current and potential insurance claims

Sales and marketing

  • Evaluate the level of competition with local, statewide and national competitors
  • Evaluate future research and development plans
  • Evaluate future industry growth and evolving marketplace trends
  • Review fluctuations in interest, inflation and economic growth
  • Review customer relationship management policies, such warranties, cancellation agreements, etc
  • Review sales contract and agreement forms
  • Evaluate the efficiency of the sales and marketing professionals
  • Determine the sales reports of all products and services

Human resources

  • Obtain a list of current employees and/or independent contractors
  • Obtain employee rules of conduct handbooks and safety policies
  • Determine which employees should stay with the company
  • Review past employee disputes and future problems
  • Review employee and/or independent contractor agreements
  • Review employee health insurance and retirement plans
  • Obtain a list of employee grievances and complaints
  • Evaluate policies about labor unions
  • Check for pending labor disputes or lawsuits
  • Review workplace accidents and/or worker's compensation claims in the past five years
  • Obtain documents and/or videos of new hire orientation and training sessions
  • Review policies about sick days, paid holidays, paid vacations and overtime pay
  • Review policies about bonuses, incentives, commissions and deferred compensation
  • Evaluate emergency training and recovery plans

Financial

  • Financial Statements - Audited
  • Financial Statements - Unaudited
  • Off-Balance Sheet Transactions
  • Contingent Liabilities
  • Prepaid Expenses
  • Audit Letters
  • Accounting Policies
  • Changes to Accounting Policies
  • Budgets
  • Projections
  • Cash Management
  • Investmet Policies
  • Hedging
  • Accounts Receivable - Aging
  • Inventory
  • Bad Debts
  • Reserves
  • Credit Support Obligations
  • Bank Statements
  • Capital Expenditures - Past

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 template

with requests that are specific to your transaction type. 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.

Project management capabilities

that enable your team, client and other parties to work together and set priorities during the diligence.

Collaboration tools

to eliminate long email threads. Team members can add comments and tag other each other on requests.

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