Creating a Due Diligence Checklist
A due diligence checklist is an essential part of the M&A process. It can help buyers avoid costly and time-consuming surprises by revealing a company’s liability in relation to problematic contracts intellectual property issues, and risks associated with litigation. It helps them determine if a deal is right for them from a cultural standpoint.
Making a Due Diligence questionnaire (DDQ) is an overwhelming task, particularly for small-scale business owners who have never done it before. It is important to be thorough but not to the point that the company is unable to respond.
While the list of documents to be requested is extensive and diverse, a few fundamental requirements are usually included. Included are three to five years’ worth of financial reports, tax returns including insurance policies, contracts for employment and copies of the operating agreement or bylaws.
These can make the DDQ more efficient for both buyers and sellers. Additionally, it will help reduce the risk of sensitive information being shared without the proper security measures in place.
Although the due diligence process can be stressful, with the right planning, it can be reduced and as simple as is possible. Talk to your M&A advisor to determine what buyers will likely want and prepare those documents in advance so that the selling process can be completed quickly. Contact the team at Allan Taylor & Co today to learn more about how to prepare your company for the sale process to be successful.