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What Due Diligence Documents Do Buyers Ask For?

By Hoke - Last updated: Sunday, August 8, 2010 - Save & Share - Leave a Comment

Due Diligence is really about having the Buyer feel comfortable with the business acquisition. Each Buyer has a different threshold to feel enough comfort to buy the business. The amount of Due Diligence documentation is up to the Buyer and Seller. The actual Due Diligence List can be negotiated and mutually agreed as part of the Purchase Agreement.

Due Diligence documentation also depends upon the type of business being sold and the price. A Manufacturer Asset Sale would require less documentation than a Profitable Manufacturer. A Retail Store would not be expected to provide an Accounts Receivable Aging.  Also a business may be priced less to reflect incomplete Due Diligence documentation.

MUST KNOW SECRETS OF SELLING A BUSINESS

MUST KNOW SECRETS OF BUYING A BUSINESS

Typical Due Diligence items are:

Three Years Federal Tax Returns

Three Years Income Statements and Balance Sheets

Three Years of General Ledger

Three Years of Bank Statements

Three Years of Check Registers

One Year of Payroll Reports

Recent Accounts Payable Aging

Recent Accounts Receivable Aging

Recent Inventory Report

Equipment List

Copies of Supplier Invoices as requested.

Copies of Customer Purchase Orders as requested.

Copy of the Lease

Copy of recent invoices for Utilities, Phone, Municipal Services.


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