The expanse of due diligence information is far deeper and wider than the information that the M&A offering document, or deal book, provides. The offering document provides enough information for a Buyer to make an offer. Due diligence provides enough information for that Buyer to be able to close the deal.
Buyers want to pay close attention to a bevy of legal paperwork to make sure Seller actually has the legal right to sell the business to Buyer. Not having the legal right to sell something poses a wee bit of a problem in selling a business!
Here are some of the items Sellers should provide for the review of corporate information:
The company’s articles of incorporation, bylaws, and minutes from board meetings
Annual reports
Names and contact info of shareholders and number of shares held by each
Names and contact info of directors and officers
Listing of the jurisdictions where the company is incorporated or qualified to do business
Listing of any assumed names or DBAs (doing business as) of the company
Listing of all federal, state, local, and foreign governmental permits, licenses, and approvals
Listing of all law firms, accounting firms, consulting firms, and similar professionals engaged by the company
As you may be able to tell from reviewing this list, Seller’s lawyer be involved with this part of due diligence. Many Sellers, when faced with some of the items on this list, respond with a blank expression and mumble, “Huh?” Sellers should check with the lawyer who incorporated the business if they’re unable to locate these documents.