“Business Due Diligence” means investigating the claims made by the Seller about the company, marketplace, products, finances and more. This process generally takes place before the sale is consummated and often before a definitive agreement is signed.
When Performing Due Diligence, Bear in Mind These Things:
1. Due diligence may be a long and arduous process. The time frame for due diligence to buy a small to mid-sized business may take from 2 to 21 days.
2. You’re going to have to ask tough questions. Don’t be afraid to ask the seller pointed questions, such as whether the company has run afoul of regulators or has been the subject of a criminal investigation.
3. A team of legal and financial professionals – including lawyers and accountants – should help you perform the due diligence.
It is important that you have all the important information from the business you are buying well before making a final purchase decision. Your business advisors should provide you with a due diligence check list of all the items they would like to investigate.
A due diligence checklist is vital to your investigation into a business. Below is a sample list of some of the items your accountant and attorney will need while completing your investigative due-diligence. Please check with your accountant and attorney for a complete list.
Due Diligence Items Include:
1. Past 3-5 Years of Complete Tax Returns
2. Past 3-5 Years of Complete Financial Statements
3. Current Interim Financials
4. Current Inventory Report
5. List of Assets Being Sold With The Business
6. Current Accounts Receivable Report
7. Current Accounts Payable Report
8. Checkbook Register for Last 3-5 Years
9. Client List
10. List Of Employees with Current & Past Payroll Records
11. Current Copy of all Licenses Utilized by the Business
12. Current Copy of the Lease
13. Any Past Environmental Reports, Appraisals, Legal Reports
14. Current, Complete Vendor List
15. Copy of All Contracts and Leases – Equipment, Advertising, Suppliers, etc.
As a Buyer, you need to know that the company and financial information you are using in your decision-making process to buy a business is reliable. Your CII Business Advisor can assist you in your due diligence investigation and can recommend expert legal and financial professionals to help you make the right purchase decision.