Due diligence is a process of steps, or benchmarks that will be taken on potential acquisition target that determines the viability of the potential purchase. Some of these steps include:
a. Detail review of pre acquisition date audited financial statements of the company.
b. Meeting with the management and key staff of the target business to go over the questions relating to the audited financial statements and their input on key success factors of the business.
c. Inspection of the location of the business and its assets that are on the books.
d. Communication with the company's auditors and legal council about the intent in acquiring their client's business and their knowledge of any pending lawsuits against the company.
e. Review target company's sales contracts, supplier's agreement, rent/lease contract, franchise agreement, employment contracts, licensing and production contracts.
f. Review of the audited financial statements for 5 prior years;
g. Review of current budgets, financial projections, and management plans including management commentary, as available;
h. Review of sales (dollars and units) and costs by product line for a period of 5 years to assess the company's growth prospects;
i. Review of recent corporate income tax filings and GST/HST returns;
j. Review of the existing information systems;
k. Employee analysis, including numbers by functional area, remuneration levels and benefits.
