A due diligence report is written before enacting a business transaction. They are commonly used in business valuation, real estate development, or in sales or acquisition. Due diligence is also done when making capital expenditures, or high-level investments. They may also be used when proposing a merger, introducing or ceasing a product line, or relocating or expanding a business.
Corporate Records
- State of incorporation and in good standing with the State;
- Capitalisation and authorised and issued shares of stock and seller of each subsidiary;
- Articles of incorporation and bylaws;
- Copies of all correspondence with shareholders and obtain a shareholder list; and
- Existence of any warrants, options, or other potentially dilutive securities.
Financial Information of a Due Diligence Report
- Copies of financial statements for the past five years that have been audited, including all notes and management’s discussion and analysis;
- Copies of correspondence between management and auditors;
- List of jurisdictions where the seller has filed taxes for the past five years;
- Tax returns for the past five years;
- All board of directors’ presentations; and
- All internally generated financial models and forecasts.
Indebtedness
- Investigate indebtedness or seller and subsidiaries, including loan agreements, notes, mortgages, and security agreements;
- Review correspondence with lenders demonstrating compliance with financial covenants; and
- Order uniform commercial code searches with each subsidiary.
Employment and Labour
- A list and profiles of officers, directors, and management;
- List of all employees, their job function, department, location, and compensation;
- Documents detailing any profit sharing, pensions, deferred compensation, stock plans, and other non-salary compensation or benefits;
- Copies of all employee handbooks, codes of conduct, and policies; and
- Pending litigation related to labour and employment law.
Real Estate
- Address and legal description for all real property;
- Copies of title issuance policies with respect to real property;
- Copies of all appraisals; and
- Copies of all studies, site evaluations, and government filings and reports prepared by consultants.
Agreements Included in a Due Diligence Report
- All agreements entered into by the company and its subsidiaries;
- All real estate leases;
- All partnership or joint venture agreements;
- All marketing, sales, commission, distributor and franchise agreements;
- All brokerage or investment banker agreements;
- All customer or client agreements;
- All licences and subscriptions; and
- All material contracts not otherwise obtained from this list.
Supplier and Customer Information in a Due Diligence Report
- List of all material customers, including Rand and volume of sales;
- List of all material suppliers including Rand and volume of sales; and
- Correspondence with customers or suppliers related to complaints or disputes.
Legal
- Copies of each report or document filed with government agencies;
- Descriptions of all litigation, administrative proceeding, and governmental investigation;
- Copies of all government licences; and
- Environmental liability assessments and environmental compliance audits.
Contact us to prepare a report for your business merger, acquisition, or sale needs.
