Business Consulting specializing in professionally confidential targeted mergers and acquisitions in the small to mid-market range; exclusively in the Drug Testing/Employment Screening/Urgent Care and Occupational Health Industry.

Due-Diligence

Typically, following a "Letter of Intent", the prospective buyer will want significantly more information then what is provided in a prospectus and financial summary.

The following "due diligence checklist" is not intended to be a defining list, because each company's due diligence will differ somewhat, but is instead intended to give a seller a "snap shot" of what some of the typical requests for information might be.

Due-Diligence Checklist (seller)

It is highly likely that a qualified suitor will want to see the following.

Person Responsible Date Received Item Description
_____________ _____________

Financial statements for last 3 years, plus interim (including Auditors report, if available)

_____________ _____________

Monthly summary income statement schedule for last 12 months

_____________ _____________

Federal Income Tax returns for last 3 years

_____________ _____________

State Income Tax returns for last 3 years

_____________ _____________

Detail schedule of G&A costs for the current year (min. of 6 months)

_____________ _____________

Copies of all debt agreements booked against these assets

_____________ _____________

Copy of current and prior year budgets

_____________ _____________

Accounts receivable aging as of the most recent month end for assets

_____________ _____________

Schedule of write-offs for the current and prior year

_____________ _____________

Accounts payable aging as of the most recent month end

_____________ _____________

Current detailed Inventory schedule, with volumes and values (applies to on-site devices, etc.)

_____________ _____________

Copies of lease agreements (other than real estate)

_____________ _____________

Discussion of contingent liabilities (bonus's, earnout agmts., EEOC, SEC, IRS, etc.)

_____________ _____________

Discussion of any purchasing, financing, royalty, franchise or other commitments

_____________ _____________

Personnel organization chart ( this will give them an idea of how clients interact with you)

_____________ _____________

Listing of employees, showing location, job description, pay rate, and date of hire

_____________ _____________

Schedule of benefits plans, with supporting documentation

_____________ _____________

Discussion of all lawsuits for past three years

_____________ _____________

Discussion of any threatened or pending legal action

_____________ _____________

Corporate legal structure

_____________ _____________

Discussion of operations, accounting, and sales management software

_____________ _____________

Laboratory contract and sample billing for most recent month

_____________ _____________

Medical Review Officer contracts and sample billing for most recent month

_____________ _____________

Copies of all distribution contracts, if any

_____________ _____________

Copies of all employment agreements

_____________ _____________

Copies of subcontractor agreements

_____________ _____________

Copies of contract labor agreements, and schedule of contract personnel

_____________ _____________

For both current YTD and prior year, schedule of revenue by contract (agrees to income stmts.)

_____________ _____________

Copies of all material contracts (minimum of 75% of total revenue derived above)

_____________ _____________

Copies of sales and marketing literature

_____________ _____________

Listing of all customers billed in the last 6 months, sorted by revenue

_____________ _____________

Copies of recent press releases and/or news articles

_____________ _____________

Current sales backlog report, showing customer information with est. volumes and values

_____________ _____________

Discussion of selling expenses, ie, commission plans, vehicle leases, marketing costs, etc.

It is highly likely that a qualified suitor will want to meet with several of your clients, especially those that command the highest sources of revenue and, not withstanding that, structure a contract that guarantees retention of a percentage of the client base (usually 90%) for a certain period of time (typically one year).