As noted in the previous post on the due diligence process, mergers and acquisitions are complex business transactions that require a significant reviewing of a wide array of paperwork. Continue reading for the second half of our suggested due diligence checklist:

General corporate matters

The potential buyer will need to know the target company’s organizational structure to properly prepare for a seamless transfer of ownership. Regardless if the target company is a corporation or a limited liability company (LLC), both parties should review corporate records, including but not limited to the following:

  • The certificate of incorporation (if a corporation) and a certificate of good standing from the Secretary of State of the state where the company is incorporated
  • The company’s Articles of Incorporation and Bylaws, and any amendments
  • Minutes of shareholder and director meetings
  • Shareholder agreements
  • Outstanding warrants and options agreements
  • List of any subsidiaries and their charter documents
  • Stock-related agreements, documents, rights
  • Active status reports from any states where the company does business
  • Licenses or permits

Physical Assets

Physical assets include any inventory, real estate, intellectual property such as patents, trademarks and copyrights, or any other tangible property, documents or equipment a company can use for profit-driven purposes. In this vein, both parties should review:

  • Leases, deeds, mortgages, title policies, surveys, zoning approvals, variances or use permits,
  • A schedule of all intellectual property including domestic foreign patents and patent applications, trademarks and trade names, domain names, copyrights and any other proprietary rights
  • A schedule of all equipment and machinery
  • A full inventory of all stock, products, goods and services

“Potential buyers should understand the overall cost of employing their workforce.”

Employees and employee benefits

The employees act as the heart of any business, the ones who keep machinery and services running. Potential buyers should understand the overall cost of employing their workforce. In addition, employers should be aware of the employees’ quality and skill levels, as well as any general labor issues. To gain a better understanding of the employees and labor issues, both parties should review:

  • Organizational charts and biographical information for management
  • A summarized history of any and all prior or pressing labor disputes, including previous, pending or threatened work stoppages, requests for arbitration or employee grievances
  • The role of a union among employees and any collective bargaining agreements in place or in negotiations
  • Compensation schedules that delineate salaries, bonuses and other forms of