Acquisition Due Diligence Checklist

With the help of the Angel Capital Association, we have compiled a due diligence checklist covering the most important items to request from an acquisition target. The list covers some general basics such as ownership capital and constitutional documents, finance and tax, staff issues such as management structure and remuneration, legal covering a range of issues relating to legal agreements and litigation, intellectual property, and miscellaneous items such as significant external communications.

General

• Memorandum and Articles of Association, Incorporation Certificate, and any changes since incorporation.
• Summary of official company policies and procedures.
• Certificate of Good Standing.
• List of subsidiaries, including details of purpose, ownership details, key personnel, and date of set-up or acquisition.
• List of partnerships and joint ventures, including summary of purpose, profit sharing arrangements, and start date.
• List of shareholders and their respective holdings, including holders of warrants, options or similar.
• Ledger of shares in issue including evidence of share certificates issued.
• Documents relating to any recapitalisation, reorganisation or restructuring since incorporation.
• Minutes of all general meetings, board meetings, and copies of the resolutions passed.

Finance

• Full-year and interim financial accounts, including audit reports if applicable.
• Quarterly management accounts.
• Financial forecasts, including financial model if applicable and cashflow forecast.
• Summary of all credit facilities or arrangements, including instruments of debt, leases and guarantees including copies of any significant correspondence with creditors.
• Copies of any significant correspondence with professional financial advisors.
• Any significant reports or recommendations from external consultants.
• Copies of all tax returns filed on behalf of the company and any correspondence between the company and tax authority.
• Fixed asset register, and schedule of current assets and intangibles.
• Details of all previous and prospective acquisitions and disposals.

Staff

• Details and CVs of directors and officers, and summary of all other employees.
• Organization chart showing lines of reporting and management.
• Employee remuneration details and plans, including employee share option scheme, and benefits available.
• Details of any employee or directors loans, or similar arrangements.
• Details of appraisal and personal development procedures and plans.
• Details of relevant trade unions.
• Details of recruitment agency arrangements.
• Details of any previous TUPEs.

Legal

• Details of all previous, current and possible litigation, court orders, legal disputes, tribunals, or arbitration, including outcomes or terms of settlement.
• Details of any previous, current and possible litigation, legal disputes, tribunals, or arbitration, on the part of directors or officers, for example bankruptcy proceedings, or malpractice.
• Contracts of employment and director service agreements.
• Any notices of breach of contract either sent or received.
• Copies of any significant correspondence with external legal counsel.
• Any orders, demands or significant correspondence from regulatory bodies, law enforcement agencies, or government authorities.
• Details of any previous, ongoing or expected investigations.
• Any material government permits or licenses, exemptions, or terminations of such.
• All statutory filings other than financial accounts.
• All significant agreements relating to current and expected revenues, and key customers.
• Master service agreements, contractor agreements, consulting agreements, retainers, or other significant service agreements or commitments with any external parties.
• License agreements, royalty agreements, or similar.
• Agreements relating to all acquisitions, disposals, mergers or any other change in the ownership or capital structure of the company, any subsidiary, or significant assets or securities.
• Agreements relating to the issuing of shares, share ownership, and any derivatives such as share options, including related rights such as pre-emption.
• Copies of all deeds.
• Copies of all significant credit agreements and leases.
• Non-disclosure agreements or confidentiality agreements.
• Any extraordinary agreements outside of the ordinary course of business.
• Any formal amendments or terminations of existing agreements.

Intellectual Property

• List of registered, pending or applied-for patents, and other official registrations of intellectual property, in all territories.
• List of any registered or applied-for trademarks and other official registrations of trade mark or name.
• Details of previous, outstanding or expected claims of infringement or misappropriation of patents, copyrights, trade marks, or other intellectual property rights.
• Register of all significant intellectual property owned and in development.

Miscellaneous

• Long term strategic plan or business plan.
• Significant external communications with shareholders or other stakeholders, including annual reports.
• Summary of any significant marketing communication, publications or material.
• External analyst ratings or reports.
• Details of all significant insurance policies.