Creating a Due Diligence Checklist
A due diligence checklist is an essential part of the M&A process. It assists acquirers in avoiding costly and time-consuming surprises by uncovering the liabilities of a company, insecure contracts, intellectual property issues, litigation risks and more. It helps them determine the right deal for them from a societal standpoint.
In the process of creating a Due Diligence Questionnaire (DDQ) can be overwhelming, especially for small businesses who haven’t done one before. It is crucial to be thorough but not so much that the company is unable to respond.
The list of documents required may be lengthy, but there are a few basic requirements that must be included. This includes three to five years of tax return and financial reports, insurance policies or employment contracts, and copies of the bylaws or operating agreement.
These can make the DDQ more efficient, both for the buyer and seller. Additionally, it will reduce the chance of sensitive information being shared without the appropriate security measures in place.
While the due diligence process can be stressful, with the right planning it can be streamlined and as easy as it can be. Your M&A advisor can assist you in identifying the documents that buyers will likely need. Prepare these documents prior to time so that the sale process can go ahead quickly. For more information on how to prepare your company for an effective sale, contact the Allan Taylor & Co team today!
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