Sample due diligence request

Below is a summarized list of standard due diligence questions to give you a general idea of what kinds of requests and questions to expect.  There typically are also industry-specific questions and requests, which we have purposefully excluded.

  1. Financials
    1. Income Statements:
      1. Quarterly, unaudited financials going back five years, broken out by service line, and location (if applicable).
      2. Expenses broken down to the extent that Gross Margins, Operating Margins and Net Margins can be calculated, by service line.
    2. Balance Sheet
      1. Most recent unaudited and audited balance sheets.
      2. Analysis of Receivables (Account Concentration, Collections, Quality, Reserves, Doubtful Accounts, Write‑Off History, Recoveries, Overdue Accounts, Aging Analysis, etc.)
    3. Financing
      1. List of contracts in force with financial institutions, giving amounts, dates of starting and terminating, and monetary correction indices
      2. Description of eventual assets offered as guarantees (Examples: mortgages, mercantile liens, etc.) or existing restrictions
  2. Property, Plant, & Equipment
    1. Equipment
      1. Financial depreciation policy.
      2. Analysis of any deferred tax liabilities.
      3. All equipment and auto leases for a period in excess of two years or that require material annual payments.
    2. Real Estate/Facilities
      1. List of addresses of properties currently owned or leased by the company, related documentation, and revenue generated by each facility.
  3. Business Review
    1. Competitor/Market Share
      1. Market Size, definition, and growth over time.
      2. Principal competitors by product and estimated market share.
      3. Comparison to competitors in terms of products, pricing, margins, technology, strengths and weaknesses.
  4. Organizational Structure
    1. Corporate Structure
      1. Certificate or articles of incorporation and bylaws. As amended to date, of the company and its subsidiaries.
      2. List of divisions and subsidiaries.
      3. List of officers and directors of the company and each of its subsidiaries or affiliates.
      4. Summary of ownership of company’s shares by each officer and director of the company, including date and price of shares when acquired.
      5. List of all corporations, partnerships, associations, joint ventures, and other business organizations in which the company owns, directly or indirectly, any interest.
    2. Management and Employees
      1. Organizational chart of company management.
      2. Roster of all personnel, including title, function, compensation, job class (e.g., exempt vs. non-exempt employees), and responsibility.
      3. Resumes of key management and technical personnel.
      4. Copies of all management contracts.
      5. Personnel policies, personnel manuals, employee handbooks, and affirmative action plans.
      6. Number of employees by division or business segments, location, and facility.
      7. List describing any family relations among shareholders, officers, and directors of the company and its affiliates.
      8. Union contracts, if applicable.
      9. Incentives Plans (Bonuses, Stock Options, Savings Plan)
    3. Accounting/Reporting
      1. Audit Staffing (Internal & External)
      2. Accounting Controls
      3. Cash Management System
        1. List of individuals with access to bank accounts.
    4. Insurance
      1. List and copy of all existing insurance policies.
    5. I.T.
      1. List of all technology platforms currently in use.
      2. Description of all key databases.
  5. Adverse Developments (where applicable)
    1. Legal Matters
      1. Description of any corporate guarantees or other liabilities which may or may not be reflected in the balance sheet.
      2. Pleadings, briefs, and other documents pertaining to any material past, pending, or threatened litigation, arbitration, or investigation before regulatory or administrative bodies, in which the company or its officers, directors, employees, or agents, as a result of such status or as a result of action taken in such position, are defendants.
      3. Summary of current provisions in the company’s financial statements made for estimated liabilities arising out of these matters.
      4. Information about any existing consent decrees or settlement agreements in which the company or an affiliate is not party but which materially affect the conduct of the company’s or any of its affiliate’s businesses.
      5. Schedule of fines and penalties incurred by the company or any of its affiliates arising out of the provision of its services, the operation of its facilities or equipment, or the sale of its products.
    2. Management and Employees
      1. All labor agreements, collective bargaining agreements, employment agreements, and non-competition agreements.  Provide human resource records, including data on prior strikes, actual or threatened.
      2. Any employment agreements or contracts, bonus or incentive compensation plans, consulting contracts, or medical reimbursement, death benefit, deferred compensation, or pension plans or arrangements, including “golden parachute” agreements, severance agreements, and agreements not to compete with the company of any affiliate upon termination of employment.
      3. Agreements with management or key personnel other than employment or consulting agreements.
      4. Indemnification contracts and similar arrangements for officers and directors.
      5. Loans and guarantees to or from shareholders, directors, officers, or employees of the company and its affiliates.  All agreements documenting transactions between the company and its officers, directors, or stockholders.
    3. Insurance
      1. Any material pending claims and claim notices, whether claims have been promptly reported, past claims experience, refusals to provide coverage, and cancellations of coverage.
      2. Any material issues with the Company’s insurance carriers that may negatively impact continuation of coverage.
    4. Environmental Issues
      1. List and description of existing or potential problems.