Performing a thorough due diligence on a potential acquisition is one of the most important tasks that a buyer needs to do when making a purchase decision. We’ve put together a list of items that buyers will want to investigate when talking to a seller.
This is part of a large series. Be sure to scan our Buyers Blog for the category Due Diligence.
Now we’re moving on into evaluating the Financial Management of your potential acquisition portion of your Due Diligence tasks. The purpose of this section is to discover the Assets of the company.
– Verify bank reconciliations for all bank accounts harboring significant cash balances.
– Obtain current detail of accounts receivable.
– Determine the days of receivables outstanding and the probable amount of bad debt.
– Obtain a list of all accounts and notes receivable from employees.
– Obtain a list of all inventory items, and discuss the obsolescence reserve. Determine the valuation method used.
– Obtain the current fixed asset listing, as well as depreciation calculations.
– Obtain an itemized list of all assets that are not receivables or fixed assets.
– Ascertain the existence of any liens against company assets.
– Obtain any maintenance agreements on company equipment.
– Is there an upcoming need to replace assets?
– Discuss whether there are any plans to close, relocate, or expand any facilities.
– Itemize all capitalized research and development or software development expenses.
– Determine the value of any net operating loss carry forward assets.
– Obtain list of intangible assets including amortization schedules
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