Due Diligence Documentation
Due Diligence is the process of evaluating a prospective business decision by getting information about the financial, legal, and other material (important) state of the other party.
Page 1
| Due Diligence Category | Documentation Task | Owner | Status |
| Business Plan, Corporate Structure, Financing |
| Business plan | Current five-year business plan | ||
| Prior business plan | |||
| Corporate organization | Articles of incorporation | ||
| Bylaws | |||
| Recent changes in corporate structure | |||
| Parent, subsidiaries, and affiliates | |||
| Shareholders’ agreements | |||
| Shareholders | Number of outstanding shares | ||
| Stock option plan | |||
| Samples of common and preferred stock certificates, debentures, and other outstanding securities | |||
| Warrants, options, and other rights to acquire equity securities | |||
| Current shareholders, including number of shares owned, dates that shares were acquired, considerations received, and contact information | |||
| Relevant private placement memoranda and other offering circulars | |||
| Lenders | Convertible, senior, or other debt financing | ||
| Bank lines of credit, loan agreements, or guarantees | |||
| Loan defaults or expected defaults | |||
| Recent corporate transactions | Description and rationale for each transaction | ||
| Purchase and sale agreements | |||
| Regulations | Business licenses | ||
| Environmental permits | |||
| Workers’ health and safety permits |
Page 2
| Due Diligence Category | Documentation Task | Owner | Status |
| Marketing, Products, Sales, Service |
| Market analysis | Competition by product line (include contact details, market size, market share, and competitive advantages and disadvantages) | ||
| Industry and market research | |||
| Trade publications and contact information | |||
| Marketing, products, sales, and service | Features and benefits of product offerings | ||
| Product rollout schedule and product life cycle | |||
| Copies of patents and trademarks filed or obtained | |||
| Pricing strategy of product or service | |||
| Descriptions of existing partners and joint ventures | |||
| Distribution channels | |||
| Promotion tactics | |||
| Top-10 customers by product line and total installed base | |||
| Sales and marketing presentations | |||
| Product catalogs and brochures | |||
| Press releases or articles written about the organization | |||
| Professional affiliations | |||
| Customer service strategy | |||
| Contracts | Major contracts by product line | ||
| Support/maintenance contracts | |||
| Warranties and guarantees | |||
| Other customer-related contracts | |||
| Supplier contracts | |||
| Technology | Technology strategy | ||
| Overall technical capabilities | |||
| Technical competitive advantages and weaknesses | |||
| Copies of user documentation by product (current and historical) | |||
| Copies of technical requirements, code strategy by product (current and historical) | |||
| Development process |
Page 3
| Due Diligence Category | Documentation Task | Owner | Status |
| Financial and Operations |
| Financial statements | Three years of historical statements:
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| CYTD statements | |||
| Most recent five-year projections (pro formas) | |||
| Monthly sales projections and sales pipeline over next 18 months, including assumptions | |||
| Key financial ratios | Liquidity | ||
| Leverage | |||
| Operating efficiency | |||
| Profitability | |||
| Return to investors | |||
| Taxes and audits | Historical tax rate | ||
| Federal and state net operating loss carryforwards | |||
| Tax returns | |||
| Receivables | Accounts receivable turnover | ||
| Accounts receivable aging schedule | |||
| Accounts receivable control and credit policy | |||
| Accounts receivable seasonality | |||
| Most recent five-year projections (pro formas) | |||
| Capital expenditures | Last five years | ||
| Five-year gross projection | |||
| Detailed priority list | |||
| Equipment | List | ||
| Depreciation method | |||
| Age | |||
| Liquidation value | |||
| Replacement value | |||
| List | |||
| Leases | Lenders | ||
| Terms | |||
| Interest rate | |||
| Payment schedule | |||
| Litigation | Current litigation and potential damages | ||
| Potential litigation and potential damages | |||
| Insurance | Property | ||
| Liability | |||
| Workers’ compensation | |||
| Other | |||
| Information systems | Description of infrastructure | ||
| Security layers | |||
| Backup strategy |
Page 4
| Due Diligence Category | Documentation Task | Owner | Status |
| Human Resources |
| Management | Organizational chart (including number of employees by department) | ||
| Resumes for key managers and key employees | |||
| Management stock incentives | |||
| Compensation and benefits | Cash compensation per employee (including salary, bonuses, commissions) | ||
| Summary of standard employee benefits (such as medical insurance, disability insurance, vacation) | |||
| Copies of 401(k) and other qualified pension and profit-sharing plans | |||
| Other | Ownership interest | ||
| Employment contracts | |||
| Performance evaluation criteria | |||
| Historical tax rate | |||
| Material transactions with insiders or associates of insiders | |||
| References | Executives: Three references for each | ||
| Attorney: All legal relationships | |||
| All directors and significant affiliates; include brief biographies | |||
| Investors: List all individuals and institutional investors | |||
| Customers: List of top 10 | |||
| Strategic partners | |||
| Consultants, freelance workers (current and historical) | |||
| Accountants (current and historical) | |||
| Bankers and creditors (current and historical) | |||
| Associations: All industry associations in which company and management are affiliated or active |