M&A Due Diligence: Suppliers and Human Resources - dummies

M&A Due Diligence: Suppliers and Human Resources

By Bill Snow

Buyer should use the time for due diligence in an M&A deal to explore the relationships the company has with other companies and individuals. She should explore information about the company’s suppliers and human resources before finalizing the deal.

M&A due diligence: Supplier info

If a company has inventory, that inventory must come from somewhere. Therefore, Buyer needs to know all about a company’s suppliers and how that company makes purchases. Required information includes

  • Listing of major suppliers and dollar volume of purchases from each supplier

  • Listing of open purchase orders

  • Summary of the company’s purchasing policies

  • Contracts with suppliers or descriptions of any significant supplier agreements

Buyer may want to contact certain suppliers, but as with making contact with customers, Seller should wait until the end of the due diligence process before granting this request.

M&A due diligence: Human resources

A company’s most valuable assets, especially for consulting and service firms, are the assets that enter and leave the building each day: the employees. A Buyer is wise to understand during due diligence how the company hires, compensates, and accounts for employees. This information can include

  • Organizational chart for the entire company

  • Listing of employees with details of hire date, position, job description, and current pay rate.

  • All agreements with employees and consultants (typically these include employment or consulting agreements as well as non-disclosure, non-solicitation, and noncompete agreements)

  • Key employees’ résumés

  • Copies of executive compensation plans, including salaries, bonuses, commissions, vacations, club memberships, and so on

  • The company’s employee handbook, including all employee benefits and holiday, vacation, and paid time off policies

  • Documentation for retirement plans

  • Listing of employee benefits programs and insurance policies

  • Listing of all employee problems, including alleged wrongful termination, harassment, discrimination, and labor disputes

  • Listing of worker’s compensation claim history and unemployment insurance claim history