ContractsCounsel Logo

Business Acquisition Due Diligence Checklist

Clients Rate Lawyers on our Platform 4.9/5 Stars
based on 9,787 reviews
No Upfront Payment Required, Pay Only If You Hire.
Home Types of Contracts Business Acquisition Due Diligence Checklist

Jump to Section

A business acquisition due diligence checklist is a well-structured and thorough document used for better understanding during the acquisition of a company. It consists of a lengthy list of things and aspects that the purchasing party and their advisers carefully analyze and assess to understand the target firm comprehensively. It helps to ensure an educated and influential business purchase. Let's read more about the business acquisition due diligence checklist.

Elements of a Business Acquisition Due Diligence Checklist

While specific parts may differ based on the nature of the transaction and industry, the following is a general checklist to consider:

  • Financial Due Diligence: This involves examining previous financial documents for performance trends, determining the accuracy of future predictions, and assuring compliance with industry standards. The objective is to thoroughly grasp the target's economic sustainability and identify any potential financial hazards.
    • Correspondence from the auditor during the last five years. These are letters issued to management outlining areas where earnings and efficiency might be improved.
    • Unaudited financial accounts are provided for comparison
    • Credit report for the company
    • Accounts receivable schedule
    • Accounts payable schedule. Examine them for any delinquent or unpaid bills that may impact profit.
    • An accounts payable and receivable aging schedule
  • Legal Due Diligence: Legal due diligence investigates the target company's contractual and legal landscape. This involves a detailed study of current contracts, an inquiry into outstanding cases, and an evaluation of industry compliance. Identifying legal responsibilities and potential liabilities is necessary for reducing post-acquisition legal risks.
    • Any existing or threatening litigation against the firm or any litigation started by the company
    • Any case resolved or finished against or launched by the firm
    • Any consent decrees, injunctions, judgments, settlements, or other orders that have been issued
    • Any loan, bank financing, or line of credit agreements to which the corporation is a party
  • Operational Due Diligence: It evaluates the effectiveness of the target company's major operations and workflows. It comprises a study of inventory and supply chain management and an assessment of the existing technological systems. Understanding operational strengths and weaknesses is necessary for predicting and guaranteeing a smooth transition.
    • Where the company owns/leases property, employs people, and does business
    • Include relevant information such as the occupancy rate and number of workstations
  • Operational Due Diligence: Examines a company's structure from a people standpoint. The organizational due diligence step gives insight into the firm's ownership, making it important to evaluate before purchasing or merging with a company.
    • List of executives and directors
    • Records about stock issuances or grants, options, and warrants
    • List of all shareholders
    • Include the number of shares issued, the dates of issuance, and the sort of compensation received
    • Document previous and present shareholder agreements, rights, and other ownership issues
  • Due Diligence in Human Resources: To comprehend the personnel environment, this aspect entails studying employment contracts, evaluating employee benefits, and investigating labor relations. Understanding the employment structure and identifying potential HR-related liabilities allows a seamless staff transition during and after the purchase.
    • Employee handbook (policies, benefits, procedures, and training should all be covered)
    • Employee demographic data (age, location, title, tenure, skillset, remuneration, and so on)
    • Files detailing all employee relations concerns, including any past/current conflicts or complaints
    • All employee non-disclosure, non-solicitation, and non-compete agreements
    • Copies of any stock option and stock purchase plans
  • Customers and Vendors Due Diligence: Due diligence on customers and vendors comprises studying existing contracts, assessing customer and vendor relationships, and identifying concentrations. Recognizing reliance on major customers or suppliers aids in assessing possible company risks and possibilities linked with customer and vendor relationships.
    • An explanation of the company's compensation policy
    • Pay history and pay freeze data help you determine if existing employees can anticipate a rise shortly
    • Employee and company non-disclosure, non-compete, and non-solicitation agreements
    • Key personnel' resumes, histories, and experience, such as senior management
    • A list of union memberships and contracts
    • All employee health and welfare insurance policies are listed and described
  • Insurance Due Diligence: Insurance due diligence evaluates current policies, pending claims, and their compatibility with risk management strategy. Understanding the amount of coverage and the possible financial effect of pending claims is essential for risk mitigation.
  • Real Estate Due Diligence: This component entails analyzing property leases and agreements, assessing the condition of owned or leased real estate, and assuring compliance with zoning requirements. Understanding real estate duties and associated dangers leads to a comprehensive understanding of the target's assets.
  • Intellectual Property Due Diligence: Examining the target company's intellectual property portfolio, which includes patents, trademarks, and copyrights. Ensure the legitimacy and protection of these assets, as well as investigate any infringement concerns to avoid future legal challenges.
    • Trademark registrations, trademark applications, and trade names
    • Copyrights, both registered and unregistered
    • Documentation about any IP claims or threatened IP claims made by or against the firm
    • Copies of intellectual property-related agreements (for example, licensing, cooperation, research, and development, etc.
    • A list of active websites and social media profiles for the firm
    • Documentation for any proprietary and customized software and information technology systems the firm uses
  • Tax Due Diligence: Reviewing tax returns, analyzing prospective liabilities, and evaluating the target's tax structure for efficiency are all part of tax due diligence. Tax-related risks and liabilities must be identified for appropriate financial planning and post-acquisition tax management.
  • Environmental Due Diligence: Environmental due diligence evaluates the environmental effects of the target's activities, analyzes potential liabilities, and validates compliance with environmental licenses. Environmental factors must be identified and addressed for risk reduction and compliance.
    • A list of any environmental liabilities or contingencies that have been described or identified
    • A list of potentially hazardous compounds used in manufacturing
    • A list of any superfund contamination
    • Copies of Environmental Protection Agency (EPA) notifications and filings
    • A list of all ongoing environmental investigations and litigation
    • Environmental audits are performed on each firm property
Meet some lawyers on our platform

Taren C.

2 projects on CC
View Profile

Ryenne S.

555 projects on CC
View Profile

Kelvin R.

22 projects on CC
View Profile

Sara S.

104 projects on CC
View Profile

Key Terms for Business Acquisition Due Diligence Checklists

  • Analysis of the Risk Landscape: A thorough analysis of the possible hazards inherent in the target company's operations, financial structure, and industry dynamics.
  • Framework for Decision Intelligence: A systematic technique that uses extensive due diligence information to improve the acquirer's decision-making capabilities throughout the purchase process.
  • Precision Evaluation of Valuation: The systematic assessment of the accuracy and precision in establishing the fair market value of the target firm, taking into account both past and expected financial data.
  • Evaluation of Compliance Assurance: A rigorous procedure that ensures compliance with all essential standards by confirming the target company's adherence to legal requirements, industry norms, and contractual commitments.

Final Thoughts on Business Acquisition Due Diligence Checklists

The business purchase due diligence checklist functions as a strategic compass, leading the acquiring party through the treacherous terrain of a possible purchase. This checklist becomes a powerful instrument for risk minimization, informed decision-making, and guaranteeing a smooth integration process by methodically assessing financial, legal, operational, and cultural aspects. Each hurdle is essential, from appropriately setting the target firm to securing intellectual property and creating cultural alignment. Finally, this checklist provides acquirers with the information they need to make sound judgments, strengthen their position, and improve the overall success of the company purchase.

If you want free pricing proposals from vetted lawyers that are 60% less than typical law firms, Click here to get started. By comparing multiple proposals for free, you can save the time and stress of finding a quality lawyer for your business needs.

How ContractsCounsel Works
Hiring a lawyer on ContractsCounsel is easy, transparent and affordable.
1. Post a Free Project
Complete our 4-step process to provide info on what you need done.
2. Get Bids to Review
Receive flat-fee bids from lawyers in our marketplace to compare.
3. Start Your Project
Securely pay to start working with the lawyer you select.

Meet some of our Business Acquisition Due Diligence Checklist Lawyers

Bill C. on ContractsCounsel
View Bill
Member Since:
January 29, 2024

Bill C.

Business Lawyer
Free Consultation
11 Yrs Experience
Licensed in IL
Arizona State University

I am a corporate business and securities attorney licensed in Illinois with more than a decade of legal experience holding both a J.D. and Master in Law in Taxation. I specialize in advising technology companies in the cryptocurrency space with regulatory compliance (eg. securities law, FinCen, and MSB rules) and cybersecurity matters (eg. GDPR, HIPAA, and CCPA), licensing agreements (SaaS, End User Licensing Agreement, Master License Agreement and etc), brokerage agreements, vendor agreements, revenue share agreements, affiliate agreements, and other related business and technology contracts. Having served as both an outside and an in-house counsel, I have worked with many early stage and mid-size companies, including blockchain companies with issued tokens in the top 100 ranking. With a strong understanding of core business needs for cryptocurrency companies and the ability to translate business needs into legal requirements, I have successfully helped businesses in the cryptocurrency space establishing their contracts, meeting regulatory compliance requirements (SEC, FinCen), and negotiating contracts with partners and vendors.

Dany C. on ContractsCounsel
View Dany
Member Since:
February 14, 2024

Dany C.

OnlyFans Attorney
Free Consultation
3 Yrs Experience
Licensed in CA
George Washington University Law School

Lawyer Vets APC is a digital legal practice founded on the idea that legal services should be available to all– Not just a privileged few. In support of this mission, we leverage technology to reduce overhead, increase productivity, and put more money in our client's pockets.

Sayema H. on ContractsCounsel
View Sayema
Member Since:
February 6, 2024

Sayema H.

Employment Attorney
Free Consultation
Pasadena, CA and Pleasant Hill, C
22 Yrs Experience
Licensed in CA
UCLA School of Law

Sayema Hameed is an experienced California attorney offering exceptional legal services in the field of employment law. With over two decades of legal experience, Sayema provides her clients with thoughtful and strategic advice and counsel, attention to detail, and high quality work to satisfy client goals and achieve successful outcomes. Helping clients maintain legal compliance, reduce liability exposure, and resolve conflicts efficiently are top priorities of Hameed Law Group. Sayema's practice includes preparation and update of employee handbooks, policies, and contracts, as well providing advice and counsel in all areas of employment in California. Sayema makes it a priority to stay up to date on the latest developments in California employment law. Sayema has been recognized as a Southern California Super Lawyer (2019-2024) and previously as a Rising Star (2009-2017) by Super Lawyers, a rating service of outstanding lawyers who have attained a high-degree of peer recognition and professional achievement.

Ann D. on ContractsCounsel
View Ann
Member Since:
February 10, 2024

Ann D.

Free Consultation
greater Philadelphia area
32 Yrs Experience
Licensed in NJ, PA

Ann R. Dougherty, Esquire practices in both Pennsylvania and New Jersey with over 25 years of experience and has taught legal writing at the Delaware Law School of Widener University. Ann’s experience includes general liability, commercial property and bad faith insurance coverage litigation. Ann has successfully represented corporations in declaratory judgment matters concerning environmental and asbestos exposure, handled excess recoveries, comprehensive claim reviews and negotiated cost sharing agreements. She has also represented religious organizations including risk management strategies. In addition to practicing law, Ann also teaches introductory Philosophy and Ethics courses. Ann is a member of the Philanthropic Educational Organization for Women and the Daughters of the American Revolution. She has served on the Boards of the American Lung Association of the Mid-Atlantic for Delaware and the Wilmington Ballet Academy.

Lissette E. on ContractsCounsel
View Lissette
Member Since:
February 12, 2024

Lissette E.

Free Consultation
12 Yrs Experience
Licensed in FL
St. Thomas University School of Law

Litigation and Immigration Attorney with over 12 years of experience.

John V. on ContractsCounsel
View John
Member Since:
February 20, 2024

John V.

Free Consultation
Veach Law PLLC
41 Yrs Experience
Licensed in NC, TN, TX
Georgetown Law School

Education: Georgetown Law (83), Yale (75- BA in Economics), Hotchkiss School (1970). Practice areas have included commercial litigation, individual litigation, and securities litigation and arbitration.

Leonid G. on ContractsCounsel
View Leonid
Member Since:
February 22, 2024

Leonid G.

Free Consultation
Baton Rouge, LA
6 Yrs Experience
Licensed in LA, MA, NY
New York University School of Law

I have been practicing law since 2018. I used to be a litigator at a nationwide practice before going in-house at a fintech company. I have experience drafting NDAs, SaaS contracts, service agreements, and stock purchase agreements.

Find the best lawyer for your project

Browse Lawyers Now

How It Works

Post Your Project

Get Free Bids to Compare

Hire Your Lawyer

Business Acquisition Due Diligence Checklist lawyers by city
See All Business Acquisition Due Diligence Checklist Lawyers
related contracts
See More Contracts
other helpful articles

Quick, user friendly and one of the better ways I've come across to get ahold of lawyers willing to take new clients.

View Trustpilot Review

Contracts Counsel was incredibly helpful and easy to use. I submitted a project for a lawyer's help within a day I had received over 6 proposals from qualified lawyers. I submitted a bid that works best for my business and we went forward with the project.

View Trustpilot Review

I never knew how difficult it was to obtain representation or a lawyer, and ContractsCounsel was EXACTLY the type of service I was hoping for when I was in a pinch. Working with their service was efficient, effective and made me feel in control. Thank you so much and should I ever need attorney services down the road, I'll certainly be a repeat customer.

View Trustpilot Review

I got 5 bids within 24h of posting my project. I choose the person who provided the most detailed and relevant intro letter, highlighting their experience relevant to my project. I am very satisfied with the outcome and quality of the two agreements that were produced, they actually far exceed my expectations.

View Trustpilot Review

How It Works

Post Your Project

Get Free Bids to Compare

Hire Your Lawyer

Want to speak to someone?

Get in touch below and we will schedule a time to connect!

Request a call

Find lawyers and attorneys by city