Due Diligence Checklist
BridgePoint Business Group
This comprehensive checklist outlines the key information and documents to review during a due diligence process. It is designed to ensure thorough evaluation of a company's operations, financials, assets, compliance, and strategic risks.
A. Organization and Good Standing
- Articles of Incorporation and all amendments
- Bylaws and all amendments
- Minute book, including all minutes and resolutions of shareholders, directors, and committees
- Organizational chart
- List of shareholders and shares held
- Agreements related to options, voting trusts, warrants, puts, calls, subscriptions, and convertible securities
- Certificate of Good Standing from the state of incorporation
- Active status reports for the last three years
- List of states where authorized to do business and annual reports for the last three years
- List of locations where the company owns/leases property, maintains employees, or conducts business
- List of assumed names and registration copies
B. Financial Information
- Audited financial statements for three years with Auditor's Reports
- Most recent unaudited statements with prior year comparisons
- Auditor’s letters and replies for the past five years
- Credit report, if available
- Projections, capital budgets, and strategic plans
- Analyst reports, if available
- Schedules of indebtedness, contingent liabilities, inventory, accounts receivable, and accounts payable
- Description of depreciation, amortization, and accounting method changes over five years
- Analysis of fixed/variable expenses and gross margins
- General ledger
- Internal control procedures
C. Physical Assets
- Schedule of fixed assets and their locations
- All U.C.C. filings
- Equipment leases
- Schedule of major capital equipment sales and purchases over the last three years
D. Real Estate
- Schedule of business locations
- Copies of real estate leases, deeds, mortgages, title policies, surveys, zoning approvals, variances, or use permits
E. Intellectual Property
- Schedules of domestic/foreign patents, patent applications, trademarks, trade names, and copyrights
- Description of technical know-how and methods to protect trade secrets
- "Work for hire" agreements
- Consulting agreements, invention agreements, and intellectual property licenses/assignments
- Patent clearance documents
- Summary of intellectual property claims or threatened claims
F. Employees and Employee Benefits
- List of employees with positions, salaries, bonuses, and years of service
- Employment, consulting, nondisclosure, nonsolicitation, or noncompetition agreements
- Resumés of key employees
- Personnel handbook and schedule of employee benefits, holiday, vacation, and sick leave policies
- Summary plan descriptions of retirement plans
- Collective bargaining agreements, if any
- Description of employee problems (e.g., wrongful termination, harassment, discrimination) over three years
- Labor disputes, arbitration requests, or grievance procedures
- Employee health/welfare insurance benefits and self-funded arrangements
- Worker’s compensation and unemployment insurance claim history
- Stock option/purchase plans and grant schedules
G. Licenses and Permits
- Governmental licenses, permits, or consents
- Correspondence or documents related to regulatory agency proceedings
H. Environmental Issues
- Environmental audits for leased properties
- List of hazardous substances used in operations
- Description of disposal methods
- Environmental permits and licenses
- Correspondence with EPA or state/local regulatory agencies
- Environmental litigation or investigations
- Known superfund exposure
- Contingent environmental liabilities or indemnification obligations
I. Taxes
- Federal, state, local, and foreign income tax returns for three years
- State sales tax returns for three years
- Audit and revenue agency reports
- Tax settlement documents for three years
- Employment and excise tax filings for three years
- Tax liens
J. Material Contracts
- Subsidiary, partnership, or joint venture agreements
- Contracts with officers, directors, 5-percent shareholders, or affiliates
- Loan agreements, bank financing, lines of credit, or promissory notes
- Security agreements, mortgages, indentures, or collateral pledges
- Guaranties
- Installment sale agreements
- Distribution, sales representative, marketing, and supply agreements
- Letters of intent, contracts, and closing transcripts from mergers, acquisitions, or divestitures (last five years)
- Options and stock purchase agreements involving other companies
- Standard quote, purchase order, invoice, and warranty forms
- Nondisclosure or noncompetition agreements
- Other material contracts
K. Product or Service Lines
- List of existing and under-development products or services
- Correspondence/reports on regulatory approvals or disapprovals
- Summary of complaints or warranty claims
- Results of tests, evaluations, studies, surveys, or data on products/services
L. Customer Information
- Schedule of twelve largest customers and sales over two years
- Supply or service agreements
- Purchasing and credit policies
- Schedule of unfilled orders
- List and explanation of major customers lost over two years
- Surveys and market research reports
- Current advertising programs, marketing plans, budgets, and materials
- Major competitors
M. Litigation
- Schedule of pending litigation
- Description of threatened litigation
- Insurance policies covering litigation
- Documents related to injunctions, consent decrees, or settlements
- List of unsatisfied judgments
N. Insurance Coverage
- General liability, property, product liability, errors and omissions, key-man, directors and officers, worker’s compensation, and other insurance
- Insurance claims history for three years
O. Professionals
- Schedule of law firms, accounting firms, consulting firms, and similar professionals engaged over five years
P. Articles and Publicity
- Copies of articles and press releases related to the company over three years
Q. Cybersecurity and Data Privacy
- Description of cybersecurity policies, procedures, and incident response plans
- Recent cybersecurity audits, penetration testing reports, or vulnerability assessments
- List of past or current data breaches, including impact and remediation details
- Documentation of compliance with data protection laws (e.g., GDPR, CCPA, HIPAA)
- Schedule of data processing agreements with third parties
- Employee training programs on cybersecurity and data privacy
- Details of cyber insurance policies and claims history
R. Technology and IT Infrastructure
- Schedule of critical software applications (proprietary and third-party) and licensing agreements
- Documentation of IT infrastructure (hardware, servers, cloud services, data centers)
- IT disaster recovery and business continuity plans
- Service-level agreements (SLAs) with IT vendors or managed service providers
- Details of open-source software usage and compliance with licenses (e.g., GPL, MIT)
- Summary of planned or pending IT system upgrades or migrations
S. ESG (Environmental, Social, Governance) Practices
- Description of ESG policies, goals, and performance metrics (e.g., carbon footprint)
- ESG reports or sustainability disclosures
- Compliance with ESG-related regulations or standards (e.g., EU Taxonomy, TCFD)
- Summary of community engagement or corporate social responsibility (CSR) initiatives
- Details of ESG-related controversies, litigation, or stakeholder complaints
- Certifications related to ESG (e.g., B Corp, LEED)
T. Supply Chain and Vendor Management
- Schedule of key suppliers, including contract terms, locations, and dependency levels
- Vendor risk assessments or due diligence reports on critical suppliers
- Description of supply chain resilience strategies (e.g., diversification, inventory buffers)
- Documentation of supply chain disruptions or issues within the past three years
- Compliance with modern slavery, human rights, or ethical sourcing regulations
- Vendor performance metrics and monitoring processes
U. Regulatory and Industry-Specific Compliance
- List of industry-specific licenses, certifications, or accreditations (e.g., FDA, FINRA)
- Correspondence with industry regulators (e.g., SEC, FDA, FCC) over three years
- Compliance with sector-specific standards (e.g., PCI-DSS, HIPAA)
- Summary of pending or anticipated regulatory changes
- Details of industry-specific audits or inspections over three years
V. Digital Presence and Brand Reputation
- List of active social media accounts, websites, and digital marketing platforms
- Recent social media or online sentiment analyses
- Summary of negative publicity, online controversies, or crisis communications over three years
- Documentation of domain name registrations and ownership
- Description of digital marketing strategies and performance metrics (e.g., SEO, ad spend)
W. Business Continuity and Risk Management
- Description of enterprise risk management (ERM) framework
- Business continuity plans for natural disasters, pandemics, or economic downturns
- Schedule of identified risks (e.g., financial, operational, geopolitical) and mitigation strategies
- Details of stress testing or scenario planning exercises over three years
X. Artificial Intelligence and Emerging Technologies
- Description of AI or machine learning models used, including development and deployment
- Documentation of ethical AI policies or compliance with AI regulations (e.g., EU AI Act)
- List of third-party AI tools or platforms and licensing agreements
- Summary of risks associated with AI usage (e.g., bias, data privacy)
- Details of patents, research, or proprietary advancements in emerging technologies
