Due Diligence / Risk Analysis

Your Homework Is Our Business!

How many times have you heard about acquisitions that went bad shortly after the deal was signed?

If you are thinking about buying or selling a business or investing in one, you want to make sure it doesn't happen to you.

This is why we always discuss Investigating before Investing. Either you Investigate now or you litigate later.

The best way to protect yourself is to do enough "due diligence" to ensure that you know what you are buying or investing in.

What is due diligence?

Due Diligence is really a form of risk management most commonly known as doing your homework before you invest. "We want to make sure we believe the story before we invest."

The Due Diligence Check List and Investigative Due Diligence

There are a number of forms of Due Diligence. The most common form of Due Diligence is that of the "Due Diligence Check List."  This is a checklist which a corporate lawyer will request that the seller complete prior to closing or making the investment on behalf of the client.

This can be a very small list, or in some situations the check list can be very lengthy and exhaustive. In some cases the list can be up to 100 pages of items to be provided before closing. Here are just a few examples that might be found on a standard due diligence check list:

Standard Due Diligence Check List

What You Should Be Asking For?

• Letters from Provincial/Federal/State/County government confirming that all tax returns are filed to date with no arrears owing (i.e. payroll, sales tax, health tax and taxes from year-ends).
• Articles of Incorporation.
• Minute Books.
• Shareholder Agreements.
• All Tax Returns Filed To Date.
• All Year-end Reports To Date.
• External and Internal Auditors Reports.
• Letters of verification confirming that all Provincial/Federal/State/County taxes have been paid.
• Letter from Commercial Landlord confirming lease terms and no arrears.
• Powers of Attorney.
• Government licenses, permits, approvals etc.
• Litigation/Execution confirming no judgments, pending or threatened litigation, claims or disputes.
• Listing of outside contractors.
• Loan agreements, lines of credit, debt instruments, notes payable, guarantees (by or in favor of the company), and any other agreements collateralized or secured by the assets.

If you wish to obtain more information on due diligence check lists, we have a number of samples. Alternatively, it is really best to consult a corporate lawyer.

Investigative Due Diligence

Investigative Due Diligence is a whole different ball game. It is in fact a background investigation on the individual and/or the company. It is best to call it Due Diligence and not an investigation.

Investigative Due Diligence can be conducted with or without the knowledge of the individual or the company being investigated. This is your decision to make. It is perfectly lawful for you to retain an investigation company to conduct a background investigation without anyone knowing about it.

If you decide not to let the individual know about our investigation, you have our assurance of compete discretion and confidentiality.