Mergers and Acquisitions Due Diligence Checklist
S+W created a mergers and acquisitions due diligence checklist which helps companies efficiently collect, analyze and ensure that all the information needed is obtained. Our checklist provides all the necessary steps to successfully conduct your due diligence, allowing you to make well-informed decisions throughout a deal’s lifecycle.
Please provide copies of the indicated papers or the necessary information, as appropriate.
1.Basic Corporate Documents:
a. Articles of Incorporation and all amendments
b. By-laws, with all modifications.
c. Minutes of all board meetings, committee meetings, and shareholder meetings, including copies of any written notifications (if given) or waivers thereof, and any written-consent to action without a meeting.
d. A list of all states where the Company owns or leases property or has workers, stating which states the Company is qualified to conduct business in.
e. A list of all countries in which the Company does business, including which countries the Company is qualified to do business in.
f. Samples of common and preferred stock certificates (where applicable), warrants, options, debentures, and other outstanding securities.
g. Copies of any voting trust, shareholder, or other similar agreement pertaining to any portion of the Company's shares.
h. Copies of any contracts pertaining to repurchases, redemptions, exchanges, conversions, or similar transactions.
i. Copies of any agreements including or assigning registration rights.
j. Copies of all agreements containing or assigning preemptive rights.
k. The Company's stock books
l. All quarterly and annual reports, as well as any other communications to the Company's shareholders in the last five years.
m. The Company's press releases from the last five years.
n. A complete list of all subsidiaries.
2. Documents for any Subsidiary: The same as in No. 1 above.
3. Securities Offerings: a. Equity Financings: copy of any stock purchase agreements.
a. Debt Financing: duplicates of convertible debt agreements
c. Stock option or buy schemes, as well as forms of option or purchase agreements that have been or may be employed in connection with them.
d. Any additional agreements relating to the Company's sales of securities, including any private placement memoranda or other offering circulars.
g. Blue Sky permits, exemption notices, and consents for the issue or transfer of the Company's securities, as well as evidence of qualification or exemption under other applicable state blue sky laws.
f. Forms D or any other forms submitted in order to establish an exemption under the Securities Act of 1933.
4. Shareholder Information:
a. Records detailing the Company's issuances or grants of stock, options, and warrants, including the names of the issuees or grantees, the amounts issued or granted, the dates of the issuances or grants, the number of shares currently exercisable (if applicable), and the consideration received (or to be received) by the Company in each case.
b. A list of all existing stockholders, including addresses and share numbers.
c. A numerical listing of stock certificates that includes the certificate number and date, the name of the shareholder, the quantity of shares, the date of Board permission and permit, and tracing transfers.
d. A list of all options proposed to be granted, including the names and addresses of proposed option holders and the number of options to be held by each.
5. Material Contracts:
a. Credit agreement bankline, including any amendments, renewal letters, notices, waivers, correspondence, and so on.
b. Other agreements, including correspondence, evidencing outstanding loans to or guarantees by the Company.
c. All outstanding real and personal property leases
d. Contracts for materials with suppliers or customers. Please specify which providers are the sole source.
e. Model sales or production contracts, for example.
f. Loan agreements and any other arrangements (including consulting and employment contracts) with executives, directors, or employees, whether or not they are currently outstanding.
g. A schedule of any insurance policies in place covering the Company's property, as well as any other insurance policies such as "key person" plans, director indemnification policies, or product liability policies.
h. Agreements for partnership or joint venture.
i. Bonus programs, retirement plans, pension plans, deferred compensation plans, profit sharing plans, and management incentive agreements are examples of compensation schemes.
j. Employee confidentiality invention assignment agreement in some form.
k. Any outstanding material contracts
6. Patent and Trademark Matters:
a. A list of the Company's foreign and domestic patents and patent licenses.
b. A list of any trademarks, trade names, or service marks that you own.
c. A list of any copyrights that may exist.
d. Copies of all material agreements for third-party licensing of Company technology.
e. Copies of all material agreements for third-party technology license.
f. Explain the significance of current patents and whether more patents are required.
g. Any correspondence from third parties concerning potential infringements of others' intellectual property rights.
h. A list of the Company's proprietary procedures.
i. Please include the name and contact information for the law firm that handles patent and trademark matters for the Company.
7. Manufacturing:
a. A breakdown of the products manufactured, employees employed, number of shifts, and capacity, if any, by manufacturing facility.
b. List of major suppliers, indicating which are exclusive sources and total and kind of purchases from each supplier for the previous and current fiscal years.
c. List of contract manufacturers or assemblers, if any, with total and type of purchases from each during the previous and current fiscal years.
d. Material or non-routine commercial relationships with suppliers, manufacturers, and so on, if any.
e. A description of all dangerous compounds utilized in production, as well as their storage and disposal methods.
Any EPA or other investigation or claim should be described.
8. Operations:
a. List of third-party developers, including total and kind of projects completed by each developer in the previous and current fiscal years, contact names and phone numbers, and forms of agreements entered into with third-party developers.
b. List of third-party software duplicators and manual publishers, including total and type of services provided by each duplicator and publisher in the previous and current fiscal years.
c. Agreements for the sale or lease of material capital equipment.
d. A list of the top 20 accounts payable, complete with contact information and phone numbers.
9. Sales and Marketing:
a. Copies of all market research or marketing studies completed in the last three years.
b. Product and service offerings of the Company
c. A list of the Company's rivals.
d. A list of the Company's 20 largest clients or groups in each of the last two fiscal years, specifying the categories of items purchased and the quantities purchased, as well as the contact name and phone number for each customer.
e. The Company's material licensing agreements, franchises, and conditional sales contracts.
f. Distribution, VAR, OEM, dealer, and sales representative agreements
g. Copies of long-term sales agreements
h. Any company-financed client purchase agreements.
i. Service and support contracts, as well as any marketing agreements.
j. All contracts for material agency and advertising in which the Company is a party.
k. The types of warranties and guarantees offered to customers.
l. Copies of any market research or marketing studies that have been conducted.
m. Sales literature and forms, such as price lists, catalogs, purchase orders, and so on.
n. A list of the top 20 accounts receivable, complete with contact information and phone numbers.
o. Backlog at the end of the most recent fiscal year and fiscal quarter.
10. Tangible Property:
a. List of the Company's real and material personal property.
b. Title documents, mortgages, trust deeds, and security agreements pertaining to the properties indicated in (a) above.
c. All existing leases for both real and personal property in which the Company is either the lessor or the lessee.
d. A list of any personal property security interests, including any UCC filings.
e. Documentation of large asset acquisitions or dispositions.
11. Audits and Litigation:
a. All letters written to auditors in conjunction with year-end and current interim audits, including "litigation letters."
b. Copies of any audit firm's letters to management about internal accounting controls.
c. Descriptions (and justifications for) any accounting method changes made in the last three years.
d. Active litigation files, such as letters asserting claims, complaints, responses, and so on.
e. Any legal settlement documents.
f. Any court or governmental agency rulings, orders, or judgements.
g. A description of any warranty claims made against the Company, any subsidiary, or any partnership or joint venture, as well as the resolution of those claims.
h. Information about any major litigation in which the Company is or may become involved.
12. Environmental:
a. Schedule of Hazardous Materials stored, manufactured, or located at any of the Company's current or former facilities, or that the Company ships or transports (Hazardous Materials means any substance or any material containing a substance that could be considered toxic or hazardous under Federal or state law, including solvents, petroleum, pesticides, paints, asbestos containing materials, lead based batteries, radioactive materials and PCB containing transformers.)
b. List of chemicals, hazardous compounds, or air contaminants regulated by OSHA that are present in any of the Company's facilities.
c. A record of any incidents involving the release of a potentially dangerous amount of any carcinogen into the workplace or the presence of asbestos in the workplace.
d. A list of all permits or permissions obtained from any government agency in charge of environmental or health regulation.
e. A list of all previous instances in which the Company addressed harmful working conditions.
f. A schedule of all the Company's facilities that discharge waste into any body of water, stream, or sanitation system.
g. A schedule of all incidents in which a liquid or solid waste material, fuel, or other Hazardous Material was spilled or released, whether unintentionally or intentionally.
h. Any violation notices or information requests received or threatened at any time for suspected failure of any facility to comply with relevant air pollution legislation or with any air quality permit.
13. Employees:
a. A description of any serious labor problems or union activities encountered by the company, including any collective bargaining agreements.
b. Employee count broken down by major employee types, as well as a management organization chart.
14. Management:
a. Completed copies of the Questionnaires for Directors and Officers.
b. Directors' and top management personnel's detailed resumes.
c. If applicable, founders agreements, management employment agreements, indemnification agreements, and "golden parachute" arrangements.
d. A schedule of all pay paid to executives, directors, and key staff in the most recent fiscal year, including salary, bonuses, and non-cash compensation (e.g., use of cars, property, etc.)
e. Bonus plans, retirement plans, pension plans, deferred compensation plans, profit sharing plans, and management incentive agreements are all examples of compensation schemes.
f. Loan arrangements and any other agreements (including consultancy and employment contracts) with executives or directors, whether or not they are now outstanding.
g. A description of any transactions between the Company and any insider (i.e., an officer, director, or the owner of a significant portion of the Company's stock).
15. Additional Review:
a. A copy of any internal or external studies of the Company or the market for its products (e.g., management consultants).
c. A summary of all OSHA investigations (if any).
c. A summary of all EPA, EEO, and other inquiries (if any).
c. A summary of all Department of Labor investigations.
d. Contracts subject to the Renegotiation Act.
f. Summary of Federal, State, Local, and Foreign Income Tax Status (Have all returns been filed?)
Have you paid all your taxes? Are there any audits by taxing authorities?
g. Business permits, such as licenses, franchises, concessions, and distributorship agreements.