Due Diligence Requirements Checklist
One of the crucial steps which determine whether a particular merger or acquisition transaction is worth finalizing is due diligence. In simple words, that is a comprehensive appraisal of an acquiring company that promotes analyzing risks and benefits from the sell side’s offer. Depending on the industry, the list of affairs to be highlighted for interested parties varies. However, there are certain areas to include in any vendor due diligence checklist to ensure the expected flow of negotiations.
Either it is a due diligence checklist for buying a business or documentation prepared for a startup licensing IP, the following elements are a must-have:
- Corporate records — these are usually any information connected with your business operations, internal communication and agreement documents, capitalization, warranties, security holders, etc.
- Financial relations and affairs — in this case, any data related to your financial commitments, credit and debt charts, as well as all the tax returns that took place over the last five-year term (it is a general practice, but the retrospective “length” may differ). Prepare to provide information about your sales and marketing ups and downs, including adopted policies and outside business analysis.
- Intellectual property and material assets — every paid preparer’s due diligence checklist won’t be complete without content about your domain names, trademarks and copyrights, as well as gained equipment, real estate, inventory stock, etc.
- Human resources — when it comes to personnel, your brand has to prepare detailed records concerning their workflow and legal information about recruiting approaches, controls and compliance preferred.
- IT systems and networks — don’t forget that it has become a natural thing to advertise your offer online, so this part of your activities is to be shared with the buy side too. The main objective here is to explain the reasons to select a particular operation platform and methods preferred to maintain Web security of your customer information.
- Environmental matters — if your business is occupied with any sort of goods production, you have to prove safety measures aren’t omitted.
- Contracts — this part is interconnected with the previous elements. The task of the target company is to present all commitments and material contracts, from equipment leases to payable/receivable accounts’ schedules.
- Audits and litigation — it doesn’t matter whether violations or legal claims happened through a joint venture of cooperation with another brand, it is literally forbidden not to disclose all litigation you have faced.
Universal Due Diligence Checklist Approach
Taking into account how much data has to be operated in order to organize an in-deep and highly-qualitative due diligence process, due diligence checklist templates will come in handy. From lists for the acquisition of common shares documents to detailed descriptions of what technology and other essential assets are owned by the business, such pre-made projects will simplify understanding for both newcomers and experienced parties of which data and in what way should be presented.
For instance, a technical due diligence checklist has to include verification of the real state of your company’s system architecture, methods chosen for performance monitoring, security, scalability maintenance, licensing, and so on.
The best approach any organization can choose is to consult with a professional attorney to get a 360-degree of their deals and avoid any unpleasant surprises in the long run. The more careful and attentive you will be during due diligence procedures, the higher the chances are that the coming M&A will be successful for both investors and target companies.