Master Due Diligence Checklist

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Master Due Diligence Checklist

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  • Hi Leung, is it possible to get a copy of your checklist? my email is goccp@comcast.net. Thanks
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  • Hi Leung, Greetings. You have created a good Master DD checklist. If feasible, please do share over email: shaheed@dharthi.org Thanks in advance. Wish you the best
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  • Hi Leung, If possible i would love to have your checklist for future use. My email is jitenderahlawat.cs@gmail.com Thank You
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Master Due Diligence Checklist

  1. 1. Due Diligence Checklist Master Yes No 1. Basic Corporate Documents 1.1 Articles/Certificate of Incorporation, including ________ _______ all amendments. 1.2 Bylaws, including all amendments. ________ _______ 1.3 Minutes of all meetings of directors, committees of directors, and shareholders, including notices of all such meetings where written notices were given, and all written consents to action without a meeting. ________ _______ 1.4 List of all states and foreign countries in which the Company owns or leases real property, conducts business and/or is qualified to do business. Copies of any such foreign qualifications. ________ _______ 1.5 Business or operating plans and financial projections. ________ _______ 1.6 Spreadsheet setting forth all issuances or grants of stock, options and warrants by the Company, listing the names of the issues or grantees, the amounts issued or granted, the dates of the issuances or grants, the price per share and the type of consideration received by the Company in each case. ________ _______ 1.7 List of all current record and beneficial owners of shares, including names, addresses, tax identification numbers and numbers of shares held by each (including number of vested and unvested shares and vesting schedules). Indicate if vesting of any such shares will accelerate on a merger or change of control of the Company. ________ _______ 1.8 List of all options and warrants currently outstanding, including names, addresses, tax identification numbers, and numbers of options and/or warrants held by each (including number of vested and unvested shares, exercise prices and vesting schedules). Indicate if vesting of any such options will accelerate on a merger or change of control of the Company. ________ _______ 1.9 Same information as specified in (1.7) and (1.8) above for All holders of other outstanding securities. ________ _______ 1.10 Samples of stock certificates. ________ _______ 1.11 All stock option plans and forms of option Agreements that have been used by the Company. ________ _______ 1.12 Forms of warrants and any other outstanding securities,
  2. 2. including any convertible debt. ________ _______ 1.13 voting agreements or trusts, shareholder agreements or other similar agreements covering any portion of the Company’s shares. ________ _______ 1.14 Trust indentures. ________ _______ 1.15 Stock purchase agreements. ________ _______ 1.16 Any other agreements relating to sales of securities by the Company, including offering circulars, prospectuses, etc. ________ _______ 1.17 Permits and other state or federal securities law filings relating to the issuance or transfer of Company’s securities, including Section 83(b) elections. ________ _______ 1.18 Agreements relating to registration rights. ________ _______ 1.19 Agreements relating to rights of first refusal, co-sale or other preemptive rights. ________ _______ 1.20 Any other employee stock plans (including Section 423 stock purchase plans), other than stock option plans. ________ _______ 1.21 All written communications with shareholders, including letters from the president, proxy statements, annual reports, etc. for the last three fiscal years. ________ _______ 1.22 Merger, consolidation, acquisition and asset purchase or sale agreements and all related documents. ________ _______ 1.23 Stockholders or Partnership agreements. ________ _______ 1.24 List of equity investments in third parties (including subsidiaries) and all related documents. ________ _______ 2. Company and Industry 2.1 Provide external and internal research reports prepared on the Company, its industry and/or key Competitors, if available. Marketing Materials ________ _______ 2.2 Discussion or prepare a description of the industry (including regions in which the Company competes) including: - Historical and projected market size by region served, - Historical and projected short-term and long-term growth, - Primary market drivers, - Industry leaders and market share in the hospitals’ primary region, - Pricing trends and price drivers, - Cost trends and cost drivers,
  3. 3. - Industry risks and opportunities, - Other industry trends. ________ _______ 2.3 List all known competitors and potential competitors. ________ _______ 2.4 Provide brief description of key competitors, including name, location, summary financial information, and potential advantages and disadvantages relative to the Company. ________ _______ 3. Financial Information 3.1 Provide copies of audited financial statements for the 3 most recently completed fiscal years and explain any significant differences with internal financial statements provided (discussion). ________ _______ 3.2 Provide consolidated and consolidating balance sheets at month-end for 3 most recently completed fiscal years and the current year-to-date period. ________ _______ 3.3 Provide customer split by white vs. grey collar clients for past three years (annual). Discuss profitability by customer________ _______ 3.4 Provide detailed breakdown of all accrued liabilities for most recent balance sheet and by month for 2006. ________ _______ 3.5 Provide consolidated income statements by month for 12 most recently completed months. ________ _______ 3.6 Provide annual consolidated income statements for the 3 most recently completed fiscal years. ________ _______ 3.7 Provide consolidating annual income statements for the 3 most recently completed fiscal years segmented by entity. ________ _______ 3.8 Discuss seasonality for the 3 most recently completed fiscal years, if applicable. ________ _______ 3.9 Provide annual cash flow statements for 3 most recently completed fiscal years. ________ _______ 3.10 Prepare a roll forward of accounts receivable by month for the 3 most recently completed months (Beginning balance + sales – collections – bad debt expense + write-offs + misc. adjustments = ending balance) ________ _______ 3.11 Explain significant changes in line items for the following: - Income statements for the 3 most recently completed fiscal
  4. 4. years and the estimated current fiscal year (margin analysis). - Income statements for the current year-to-date period and the corresponding prior year year-to-date period (margin analysis). - Income statements for the most recently completed month and the corresponding prior year month (margin analysis). - Balance sheets at year-end for the 3 most recently completed fiscal years and the most recent month-end. - Working capital at quarter-end for the most recently completed fiscal years, the most recent quarter-end and the most recent date available. 3.12 Provide accounts receivable aging at for the most recent month ended and the most recently completed fiscal year ________ _______ 3.13 Provide schedule of top ten customers by annual sales for the past 3 years. Explain reason for any major customer losses during that time period. ________ _______ 3.14 Provide accounts payable aging for the latest year-end and the most recently completed period. ________ _______ 3.15 Provide monthly internal executive management reporting packages for the most recently completed fiscal year and the current year-to-date period. ________ _______ 3.16 Provide copies of all borrowing base certificates prepared during the most recently completed fiscal year and the current year-to-date period. ________ _______ 3.17 Prepare list and description of significant accounting and financial issues, internal or external, relating to the Company or its industry (payroll tax, L/C’s, etc.). ________ _______ 3.18 Provide the Company’s detailed budget/forecast for the past 3 years, the current year, and any future years, if available, and explain significant assumptions (and comparison to actual results). ________ _______ 3.19 Provide a copy of the Company’s accounting policies and procedures manual, and describe significant changes in the past 3 years. ________ _______ 3.20 Provide description of any payroll taxes overdue and discussion of IRS, or other, expectations for payment. ________ _______ 3.21 Provide projection of letter of credit requirements and detail of current letter of credits outstanding (and expected collateralization).
  5. 5. ________ _______ 3.22 Provide summary of all existing debt, including amount, maturity, coupon creditor name and any relevant covenants. List any existing or expected defaults as it relates to covenants, including shareholders. ________ _______ 3.23 Copies of all correspondence, reports, and notices relating to any tax disputes, claims, assessments, audits or other proceedings with the Internal Revenue Service, or any state, local, or foreign taxing authorities and a list of all actual or potential tax claims. 3.24 Provide most recent trial balance detail ______ ______ 3.25 UCC or other lien filings against the Company’s assets. ______ ______ 4. Services 4.1 Provide complete list of services offered by the Company, including type of services offered, mix by sales and projected trends/focus going forward. ________ _______ 4.2 Provide list of pricing and margins by service provided for the past three years and most recent quarter. Include gross and operating margins by client employee ________ _______ 4.3 Provide customer split by white vs. grey collar clients for past three years (annual). ________ _______ 4.4 Summarize terms of all major contracts with insurance and benefits providers. ________ _______ 4.5 Describe any intended expansion of service offerings and estimate of expected billings and correlating margins on an aggregate basis as well as on a per client employee basis. ________ _______ 4.6 Explain process of claims administration for both insurance and benefits. ________ _______ 4.7 Summarize contractual terms with customers and provide schedule of annual client turnover for the past five years. ________ _______ 5. Vendors 5.1 Describe relationship with major insurers and benefit providers, including logistics, administration and fulfillment. List summary of major contractual terms with such providers ________ _______ 5.2 Describe partnership with major vendors, including services provided, existing contracts and expected relationship going forward. ________ _______
  6. 6. 5.3 Describe any recent or expected vendor or service quality issues, pricing issues, alternative benefits and insurance suppliers. ________ _______ 6. Capital Expenditures 6.1 Provide projected capital expenditures, if any, broken by category and timing. ________ _______ 6.2 Provide schedule of any necessary technological or infrastructure related capital expenditures required to meet growth projections ________ _______ 7. Governmental Regulations and Filings. 7.1 All material filings, compliance reports, deficiency notices, applications and licenses, employee bonding, and all documents relating to investigations or reviews conducted by, and all approvals, determinations, rulings and orders of, any federal, state, or local regulatory agency, including correspondence relating to actual or alleged violations of applicable laws, rules, or regulations. ________ _______ 8. Financing. 8.1 Prepare summary list of all financing arrangements, including outstanding debt, lines of credit, leases, etc. ________ _______ 8.2 Provide copies of loan agreements and all material correspondence with lenders of Seller, including any compliance reports or certificates submitted by Seller or its independent public accountants. ________ _______ 8.3 Provide copies of all line of credit agreements, debt instruments, financial or performance guarantees, indemnification agreements, mortgages, security agreements and related documents with respect to any of the foregoing, and a schedule of all liens and equipment leases to which Seller is a party and to which any of its assets are subject. ________ _______ 9. Litigation and Legal Affairs. 9.1 Summary of all pending and threatened litigation in excess of $25,000. Include current status of each and expected outcome by Company management or legal counsel. ________ _______ 9.2 Certificate(s) of good standing of all targeted companies. ________ _______ 9.3 Documentation relating to lawsuits and related Pleadings (i.e. complaints, answers, counterclaims,
  7. 7. Demurrers, etc.). ________ _______ 9.4 Correspondence, memoranda or notes concerning inquiries from federal or state tax authorities. ________ _______ 9.5 Correspondence, memoranda or notes concerning inquiries from federal or state occupational safety And hazard officials. ________ _______ 9.6 Correspondence, memoranda or notes concerning inquiries from federal or state authorities regarding equal opportunities violations. ________ _______ 9.7 Attorneys’ audit response or opinion letters to auditors in connection with audits. ________ _______ 9.8 Attorneys’ opinion letters to Company concerning the Potential effects of any significant proposed or pending Changes in any state or federal law, rule or regulation. ________ _______ 10. Employee-Related Information. 10.1 Provide company organizational chart. ________ _______ 10.2 Provide summary of organizational changes pursuant to each acquisition over the past 3 years. ________ _______ 10.3 Provide complete listing of employees with corresponding compensation and job descriptions. ________ _______ 10.4 Provide summary list of benefit and bonus plans offered to employees. ________ _______ 10.5 Provide resumes and prepare brief biographies of key management. ________ _______ 10.6 Describe conditions of the local labor market, such as shortages in certain skills, wage levels, etc. ________ _______ 10.7 Copies of all bonus, profit-sharing, stock purchase, contributory savings, pension, incentive stock options, and other employee benefit plans or arrangements to which Seller is a party. ________ _______ 10.8 Description of any labor disputes, grievances, requests for arbitration and pending proceedings relating to employees of Seller. ________ _______ 10.9 Description of employee turnover rate. ________ _______
  8. 8. 10.10 Copies of severance policies and severance agreements. ________ _______ 10.11 Copies of all sickness and disability schemes and maternity/paternity schemes. ________ _______ 10.12 Details of the current accrued holiday pay liability. ________ _______ 10.13 Details of employees (including directors) dismissed or made redundant or whose contract was otherwise terminated in the last 2 years who have made or are likely to make claims against the Seller. ________ _______ 10.14 All plan documents since the plan’s original adoption, including, trust agreements, plan amendments, adoption agreements, basic plan documents. ________ _______ 10.15 Certified resolutions of the Board of Directors adopting the Plan, adopting Plan amendments, delegating fiduciary responsibility to any person or entity. ________ _______ 10.16 Two most recent Form 5500s, as filed with the IRS, including all schedules, attachments and audit reports, if any. ________ _______ 10.17 The most recent summary plan description and any summary of material modifications distributed to plan participants. ________ _______ 10.18 The most recent favorable determination letter or notification/opinion letter if standardized prototype. ________ _______ 10.19 IRS Determination Letter on termination. ________ _______ 10.20 Final Form 5500 filing. ________ _______ 10.21 Board Resolutions terminating the plan ________ _______ 10.22 Copies of all Employment Agreements (or, if appropriate, forms of employment agreement). ________ _______ 10.23 Form of Consulting Agreements. ________ _______ 10.24 Schedule of all consultants by name, length of service
  9. 9. and services performed. ________ _______ 10.25 Employee Handbook. ________ _______ 10.26 Copy of non-qualified profit sharing plan documents. ________ _______ 10.27 Copies of plan documents. ________ _______ 10.28 Insurance Policies. ________ _______ 10.29 Rabbi Trust Agreements or other funding arrangements. ________ _______ 10.30 Copy of DOL notice for any Top Hat plans. ________ _______ 11. Insurance. 11.1 Summary list of all insurance policies currently in place. ________ _______ 11.2 All insurance coverage and loss reports, surveys, and statistics and risk management reports for Seller and its assets for the past 3 years. ________ _______ 11.3 Copies of all insurance policies under which Seller is insured and certificates of insurance for all such insurance. ________ _______ 11.4 A list of all significant insurance claims within the past five years that relate to Seller or its assets. ________ _______ 11.5 Last audit and/or audit worksheets for all policies subject to audit. ________ _______ 11.6 Latest schedule of insurance (prepared by broker/s) ________ _______ 11.7 Financial agreements with all insurers regarding quot;loss sensitivequot; programs for each policy year that has open claims – Casualty & Health insurance. ________ _______ 11.8 Audits, loss runs and loss sensitive adjustments (retro, large deductible, retention, etc.) for each policy year that has open claims. ________ _______
  10. 10. 11.9 Triangulations for all loss sensitive programs, including total incurred losses, paid losses and claim counts. ________ _______ 11.10 Experience modification data. ________ _______ 11.11 Property loss summary (date, type, location amount) for at least 3 full years. ________ _______ 11.12 Liability loss runs, currently valued, for last 5 years. ________ _______ 11.13 Worker’s compensation loss runs, currently valued, for at least 3 years. ________ _______ 11.14 Automobile loss runs, currently valued, for at least 3 years. ________ _______ 12. Properties and Leases. 12.1 Summary of all leases of equipment and real property, including lease assignments and sub-leases, to which Seller is a party, either as lessor or lessee. ________ _______ 12.2 All agreements encumbering real or personal property owned by Seller, including all mortgages, deeds or trust, and security agreements. ________ _______ 12.3 All recent appraisal values for owned property or equipment. ________ _______ 13. Electronic Commerce - Discussion 13.1List/description of computer software owned or used by the Seller and copies of the licenses. ________ _______ 13.2Confirmation that copyright in software is fully vested in the Seller and if programs were written by third party consultants, copies of all agreements with such consultants. ________ _______ 13.3List of all third-party software included in or used in the development of software owned or used by the Company. ________ _______ 13.4List of all employees or consultants who worked on
  11. 11. software developed by the Company. ________ _______ 13.5Warranty and maintenance history of all software owned or used by the Company. ________ _______ 13.6Standard end-user software licenses and other sample Contracts with end-user or other customers. ________ _______ 13.7Contracts, understandings or proposed transactions with major suppliers, content providers or manufacturers. ________ _______ 13.8Distributorship or reseller agreements in which the Company is distributor or reseller. ________ _______ 13.9Licenses of third-party owned software, technology Or other intellectual property to the Company. ________ _______ 13.10 Settlement documents and release agreements. ________ _______ 13.11 Agreements with subsidiaries, affiliates or shareholders. ________ _______ 13.12 Tax-sharing or overhead sharing/allocation agreements. ________ _______ 13.13 Agreements with government entities. ________ _______ 13.14 Agreements that restrict the Company from engaging in any business or industry, or from entering any geographical market anywhere in the world, including any exclusive distribution agreements. ________ _______ 13.15 Other material contracts outstanding. ________ _______ 14. Information Systems - Discussion 14.1Provide overview of information systems in place supporting all aspects of the Company’s business, i.e., accounting, benefits administration, workers comp administration, etc. ________ _______ 14.2Describe terms and costs of ongoing contractual services provided by third-parties. ________ _______ 14.3Provide detailed description existing technology platform and scalability of customer base under existing infrastructure. ________ _______ 15. Intellectual Property Rights 15.1 List of patents or pending applications (both domestic
  12. 12. And foreign). ________ _______ 15.2 List of trademarks/service marks, trademark/ service Mark registrations or pending applications ( both Domestic and foreign). ________ _______ 15.3 List of trade names. ________ _______ 15.4 List of copyrights, copyright registrations or pending applications. ________ _______ 15.5 List of Internet domain names. ________ _______ 16. Real Estate Matters 16.1 Title reports for any real property owned by the Company. ________ _______ 16.2 Real estate purchase, lease or sublease agreements for all offices, stores, manufacturing facilities and any other real property. ________ _______ 16.3 List of all mortgages, trust deeds, easements, etc. ________ _______ 16.4 Appraisals of any real property assets. ________ _______ 16.5 Environmental assessment reports. ________ _______ 17. Audit Documentation 17.1 Management letters from accountants concerning internal accounting controls in connection with all audits since the Company’s inception. ________ _______ 17.2 Letters that have been sent to the Company in connection with all audits since the Company’s inception. ________ _______ 17.3 Details of any change in auditors and/or change in accounting principles. ________ _______ 18. Miscellaneous 18.1 Press releases regarding material developments. ________ _______ 18.2 Correspondence with counsel or third parties relating to insolvency issues, bankruptcy or creditors' rights matters, including any analysis of whether any payments to creditors may be preferences, agreements among creditors, agreements for the composition of debt, etc. ________ _______ 18.3 Analyses of the Company prepared by investment bankers, management consultants or others during
  13. 13. the past three fiscal years or the current fiscal year. ________ _______ 18.4 All other material documents or descriptions of all other facts or things that are important to an understanding of the Company, its products and services, or the industry in which it operates. ________ _______

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