When it comes to due diligence, most fat and small companies do not hesitate to spend a little in DD to retain the best due diligence report.
Mergers and acquisitions have been one of the oldest business developments that require efficient due diligence.
The question that arises here is that, is your due diligence efficient? To check if your due diligence is efficient accurately analyze the DD report.
What is a Due Diligence report?
A due diligence report is documentation sent to the members of the executive team of professionals who will evaluate transactions. In simple words, it will contain all the information required before closing a deal.
What should a due diligence report cover?
A due diligence report is frame by dividing it into sections. Here are the aspects that will be cover in a DD report.
1. Corporate records: This section includes the state of incorporation, authorized, and issued shares of stock. It shall also include the shareholders, warrants, or other potentially dilutive securities.
2. Financial Information: Copies of all the financial statements from the past five years are to be included in a DD report. Local, state, and federal tax returns for the last five years, and all financial models and forecasts are present in this section.
3. Indebtedness, if any: This section shall include all loan agreements, mortgages, and security agreements.
4. Employment: Documents and details of employees, their job functions, departments, salaries, etc. are included in this section of the report. It shall also include employee handbooks, COC, policies, and indemnity agreements.
5. Property: This section includes legal documents of the property, the title issuance policies, and copies of appraisals.
6. Agreements: It will include all the agreements like joint ventures, real estate leases, brokerage, licenses, etc.
7. Supplier and Customers: This section is crucial. It will include the details of who the company has been involve with in terms of supplies. Also, the customers the organization has been serving shall be included in this section.
8. Legalities: It will include all government licenses, descriptions of litigation, and investigations. Through this section, you will come to know Is this organization following an illegal practice.
Why do you need a due diligence report?
Well, an efficient DD report will help you find skeletons before the deal is closed. The DD report is a baseline for decision making. It’ll give you a clear idea of how the company works and what are its future plans.