Anyone who has ever bought or sold a business, or has even thought about it, has heard the
term “due diligence.” Most people I meet don’t know what it is or, if they do, severely
underestimate what it means.
It is best to compare it to a more familiar term – when you buy a house, you typically make an
offer “subject to” conditions such as financing and a home inspection. Due diligence is the
business equivalent to the home inspection – is the foundation strong? (legal documentation) –
Will the roof need to be replaced in a year? (Financial issues). Does the vendor have clear title
(debt checks). A checklist is below, but it should not be considered complete – always consult a
professional (lawyer, accountant, business consultant) to ensure you have covered all the
bases.
Corporate structure, Articles, by-laws, minute books and capitalization
Corporate, asset, and debt searches
Financial statements
Government obligations (PST, GST, payroll deductions, WCB, other, other, other…)
Operational issues – documentation of policies & procedures
Real property review
Insurance
Material contracts
Employment issues
Litigation (past, present, potential)
Environmental issues
Related party transactions
Intellectual property (patents, trademarks, other)
Licensing issues (liquor, food, etc.)
Need more information? Call us at 204-478-7266, ext. 110. or click
https://www.bealbusinessbrokers.ca/buying-a-business/ to download our free e-book on
buying a business.