What due diligence will buyers do?

When a sale has been agreed and the ‘heads of terms’ have been drawn up by Ventura Business Brokers your buyer will want to carry out due diligence.

Due diligence is the final stage in the buying process. As a guide, below is a non-exhaustive list of the areas that a buyer may want to look at before signing contracts.

The level of due diligence will, of course depend on the size and structure of the deal and the type of business being sold.

Company Information

• Company registration documents
• Articles of association
• Directors details
• Shareholder details
• Share option schemes
• Board meeting minutes

Products and services

• Product range
• New product development
• Trade marks and patents

Technology

• Technology used
• Hardware
• Software and licences
• E-commerce
• Intellectual Property

Marketing

• Pricing policy
• Advertising and promotion
• Distribution channels
• Customer base and spread
• Market share by product

Business Plans

• Current business plan
• Future plans
• Previous business plans

Financial Information

• Historical profit and loss statements
• Historical balance sheets
• Cash flow information
• Year to date management accounts
• Customer Invoices
• Supplier Invoices
• Sales forecasts
• TAX and VAT information
• Aged debtors and creditors
• Payment terms
• Credit control policy
• Stock level
• Obsolete stock

Legal

• Supplier contracts
• Customer contracts
• Staff contracts
• Leases and hire purchase agreements
• Loan agreements

Relationships with key suppliers

• Supplier details
• Payment terms

Relationships with key customers

• Customer details
• Payment terms

Capital Expenditure

• Historical capital spend
• Capital expenditure projections and priorities

Property Information

• Description
• Valuation
• Leases

Insurance

• Public liability policy
• Employee liability policy
• Property Insurance
• Other policies

Competition

• Key competitors
• Competitive analysis
• Current competitor activity

Management and staffing

• Organisation chart
• Salaries
• Benefits in kind (cars, healthcare etc)
• Profit share and bonus arrangements
• Trade union activity
• Collective agreements
• Pension Plans

Assets

• Asset list
• Age of equipment
• Replacement value

Litigation

• Current litigation
• Past litigation
• Pending or possible litigation