We did some work recently advising a client on  a possible acquisition a small service business and came up with a checklist of items to review:

  • key employees – plan for retention and role in merged entity
  • financials
    • check register – all checks in last two years
    • bank statements
    • income sheet and balance statement
  • contracts
    • existing customer contracts  terms and expiration
    • leases and other supplier contracts and obligations
  • sales pipeline and forecast
  • existing Sales Tools
    • proposals
    • statements of work
    • RFP responses
    • demo examples and scripts
  • customer satisfaction (interview to determine)
    • current level of satisfaction with offerings and relationship
    • what needs to be improved
    • what will be required to secure contract renewals

Key risk reducing aspects of a deal

  • Your team has relevant and deep domain knowledge
  • Your team can sell and manage projects in the areas the firm operates in
  • You know one or more people who can vouch for the character of the executives
  • You have a plan for the future of the business that goes beyond current clients

Here are some other acquisition due diligence lists: