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A Mergers & Acquisitions Advisory Firm Sample Due Diligence List – WSPEG, Inc. – A Mergers & Acquisitions Advisory Firm
Due Diligence Information Request
A. Most recent detailed monthly balance sheets and the last three audit dates if available
B. Most recent detailed monthly income statements and the last three audit dates
C. Consolidating Financial Statements
D. Projected financial statements as well as significant projection assumptions
E. List of any changes in accounting policies or change in estimates (within a 15 month period)
F. Discussion of Financial Results II. Income Statements
A. Sales by major clients or product line for last 3 fiscal years.
B. Gross margin by major client or product line for last 3 fiscal years.
C. Summary of purchases by major vendor. D. Payroll data
III. MIS/Data Processing
A. Descriptions of major financial and operating systems and related cost of systems maintenance
B. Description of major hardware configuration and related systems software
C. Capacity utilization of current system and the cost of any expected upgrades
D. Proposal for system upgrade
IV. Balance Sheets
As of last full month and at the last three audit dates: A. Cash
1. List of all bank accounts
2. Bank reconciliation for all open accounts
3. Description of cash management policies
B. Accounts Receivable
1. Reconciliations of the A/R trial balance to the general ledger
2. A/R aging analysis
3. Detail of accounts receivable write-offs for the past two years
4. Description of credit terms and credit policies and procedures
5. Analysis of sales allowance and discount accounts
C. Inventory
1. Inventory listing as of most recent month X/XX/XX
2. Breakdown of inventory held at the Company, in consignment and at distribution facilities
3. Breakdown of inventory by major category
4. Inventory reserve calculation
5. Description of inventory costing procedures
6. Analysis of previous two years’ inventory cycle counts
D. Deferred Costs & Prepaid Expenses
1. Detail and description of prepaid expenses
E. Plant, Property & Equipment
1. Detail listing of fixed assets
2. Reconciliation of the fixed asset ledger to the general ledger
3. Rollforward of fixed assets
4. Existing capital and/or operating leases
F. Accounts Payable
1. Reconciliation and aging of the A/P trial balance to the general ledger
2. Description of payment terms
G. Accrued Liabilities
1. Detail of accruals included within accrued expenses/analysis of significant accruals included within balance
2. Detail of any outstanding letters of credit
H. Financing
1. Detail of revolving credit agreements
2. Detail of guarantees, or other contingent obligations of the Company
3. Bank letters or agreements confirming lines of credit
4. Documents and agreements evidencing other material financing arrangements
5. Copies of correspondence with lenders for the past three years by the Company, or its independent public accountants, regarding compliance with covenants in financing documents
I. Other
1. Management contracts and fee calculation
LEGAL REVIEW
V. Corporate Records
A. Articles of Incorporation of the Company with all amendments thereto to date
B. Bylaws of the Company as currently in effect
C. Minutes of all meetings of the Board of Directors, any Committee, and the Shareholders of the Company
D. Stock Certificates
E. Organization chart
F. Phantom stock agreements and statements
G. Dividend restrictions – negative loan covenants
H. All sales and supplier agreements
I. GLT International articles of incorporation
J. FTC sales agreement
K. FSC articles of incorporation
L. FSC shareholders agreement
M. FSC minutes of annual shareholders meeting
VI. Governmental and Industry Regulations and Filings
A. All material governmental permits, licenses, franchises, concessions, etc., of the Company
B. All federal income tax returns for the past five years
C. All state/local income, franchise, sales, property, and excise tax returns for the past five years
D. All tax returns relating to the Foreign Sales Corporation (FSC)
E. Tax return extension VII. Material Agreements
A. Employment agreements
B. All agreements, indentures or other instruments which contain restrictions with respect to the transfer of assets or payment of dividends or other distributions in respect of the capital stock of the Company
C. A list of all commitments for material capital expenditures, and copies of any related contracts or documents evidencing the commitment
D. All loan agreements or all documentation relating to loans or advances to, or investments in, any other person by the Company, or any agreements, contracts or commitments relating to the making of any such loan, advance or investment, including all documents and agreements evidencing loans to employees of the Company by the Company
E. All management service, consulting, or other similar types of contracts
F. All insurance policies currently in effect
G. Copies of title insurance policies, any updated title searches, and any surveys with respect to all owned real estate
H. Recent appraisals, if any, of any owned real estate or personal property
I. Business plan or strategic plan prepared by the Company within the past three years
J. Agreements containing a covenant or a condition relating to a change in control of the Company
K. Contractual operating agreements
VIII. Environmental Matters
A. Copies of any environmental audit, of real estate owned or leased by the Company
B. Copies of any compliance audits of the Company’s operations to address issues of compliance with federal, estate, and local statutes, regulations, ordinances, or other rules with respect to environmental or other health and safety matters
IX. Intellectual Property
A. A list of all trademarks, trade names and/or logos owned or used
B. Copies of all license agreements relating to patents, trademarks, know-how, etc. X. Litigation
5. A schedule of all litigation, administrative proceedings, or governmental investigations, audits or inquiries, now pending or threatened, or concluded within the last five years
B. A schedule or workers’ compensation claims for the last three years XI. Employee Benefits
A. Summary of Employee Benefit Plans/ Simple 401(k) plan
B. Forms 5500 for Company pension plan
C. Previous Profit plan
D. Description of any bonus plans
E. SEP-IRA plan
F. Employee considerations upon closing
G. Employee Wage increases over 5%, All employee listing/start dates
XII. Miscellaneous
A. Copies of current sales literature and promotional materials with respect to the Company’s products.
B. Standard warranty, sales and credit terms, and form contracts of sale.
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