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M&A Due Diligence: Real Estate, Facilities, and Other Fixed Assets

Real estate, facilities, and other fixed assets are important considerations when making an M&A deal. The following information is a critical part of the Buyer’s due diligence:

M&A due diligence: Real estate and facilities info

A business isn’t a business unless it has a place to operate from. Providing Buyer with the following details on the business locations and the nature of those locations is another key responsibility of Seller during due diligence:

  • Listing of all business locations

  • Listing of all owned or leased real estate, including locations

  • Copies of all real estate appraisals, leases, deeds, mortgages, title policies, surveys, zoning approvals, variances, or use permits

  • Lease terms, including date signed, termination dates and rights, renewal rights, rent amount, and unusual provisions (such as purchase option), as well as any defaults or breaches

  • Listing of current and pending construction in progress, including date commenced, expected completion date, and any additional financial commitment necessary to complete the project(s)

Who owns the facility, and is it part of the deal? Is Buyer also buying the facility, or will she be leasing it from Seller? In most cases, the parties need to conduct any real estate transaction outside the business sale.

M&A due diligence: Fixed assets

Fixed assets can play an enormous role in financing an acquisition and helping an owner to obtain a loan. For this reason, Sellers need to spell out any and all of the company’s fixed assets to Buyer during due diligence. This information includes the following:

  • Listing of all fixed assets, with separate lists for owned assets and leased assets

  • Information on the assets, including a basic description of the asset, date acquired, original purchase price, depreciation years, accumulated depreciation, net book value, and asset location

  • All Uniform Commercial Code (UCC) filings (any time a lender makes a loan secured by the assets of a business, that lender files a document stating it has a claim against the business’s assets)

  • Listing of sales and purchases of major capital equipment

  • Listing of unpaid balances and open purchase commitments for any capital equipment

  • Listing of any surplus or idle equipment and the equipment’s dollar value

  • Vehicle registrations

Consulting and service businesses likely don’t have much in the way of fixed assets (desks and computers are about it). Buyers of these types of companies shouldn’t expect much in the way of fixed assets.

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