Information Required for Due Diligence
27 июля 2012 15:02 Новости I. Core Business
1. Overview:
A. Products / services / market share
B. Organization structure and staffing levels
C. Operational strengths / weaknesses
2. Operations:
A. Supply budget documents for current and past year, including cost and margin projections
• Include expenditures for advertising, promotions, etc.
B. Determine size of installed base by customer segment
• List top twenty clients / customers
C. Discuss dependence on major customers
D. Explain sales processes and cycles for strategic alliances
E. Marketing strategy:
• Key target markets (list by priority)
• New products / extensions development
• Key success factors
3. Market Position:
A. Market size, growth rate, maturity and saturation
B. Top competitors (existing or expected within three years)
C. Differentiators / competitive advantages
D. Regulatory issues
E. Major emerging industry trends
F. Strengths / weaknesses
G. Problems / opportunities
H. Reputation / image / awareness
П. Finance, Controllership and Accounting
1. Income Statements (Historical):
Provide and discuss the following:
A. Sources of revenue and revenue recognition policies
B. Gross margins, operating margins, and net margins
C. Cost of sales, marketing, SG&A, corporate overhead and other expenses
D. Fixed price versus cost plus contracts — percent of business represented by each
E. Major trends, contracts, competitive factors, technological changes (including impact on profitability)
F. Tax rate and tax liability exposure (tax credits, foreign tax rates, foreign tax credits, deferred taxes)
G. Indicate any foreign exchange management practices if any
H. Quality of earnings
• Changes in accounting and reporting
• Book/tax differences
• Discretionary or temporary reductions of expenses (-e.g. Advertising)
• Reversals of reserves or normal operating expenses charges to reserves
• Extraordinary, catch up adjustments, changes in estimates, restructuring charges, or other unusual or non-recurring charges or credits (including normal operating charges)
• Year-end adjustments
• Non-operating income and expenses
2. Cash Flow Statements and Financing (Historical):
Provide and discuss the following:
A. Sources and uses of cash
B. Capital expenditures
C. Depreciation and amortization policies and schedules
D. Net working capital requirements
E. Financing arrangements
3. Balance Sheet (Most Current):
Provide and discuss the following:
A. Cash and cash equivalents
B. Major Accounts Receivable and Accounts Payable C. Normal and special credit terms
D. Have all appropriate accruals have been made (consider timing of large usual payments which will need to be made)
E. Acceleration of payments of liabilities as a result of this transaction
F. Significantly out of balance accounts
G. Contingent liabilities (consider accounting and potential cash flow implications)
• Unasserted claims, litigation, guarantees, etc.
• Disputed taxes, etc.
• Contingencies related to leases, purchase commitments, etc.
• Indicate any remaining obligations for businesses sold or disposed of
H. Receivables management practices (account concentration, collections, quality, reserves, doubtful accounts, write-off history, recoveries, overdue accounts, aging analysis, receivable policy)
I. Fixed-asset summary (type, location, date of acquisition, appraisals, encumbered state)
J. Long-term liabilities
K. Deferred liabilities
L. Pre-paid and accrued accounts
M. Warranties and obligations under existing contracts
N. Reserves and customer claims
O. Off-balance sheet assets
P. Allocation of corporate overhead information
Q. Other
• Conflict of interest policies and related party transactions
• Differences in interim reporting practices
• Indicate whether accounting policies and practices are liberal, conservative, or middle of the road
R. Projected Financial Data (Minimum Three Year Pro Forma)
Provide explanations for all significant deviations from historical trends
1. Business Plan:
Provide and discuss the following:
A. Income Statements ‘
B. Balance Sheets
C. Cash Flow Statements
D. Consolidated financial statements
E. Business segment data
F. Summary of major contracts (existing and expected)
1. Income Statements:
Provide and discuss the following:
A. Cost savings potential and revenue synergies
• Corporate SG&A
• Business segment SG&A
• Other cost savings potential
• Potential revenue synergies (for Gateway) from current contracts
B. New service development programs
C. Competitive and/or technological changes assumed
1. Balance Sheets:
Provide and discuss the following:
A. Estimated changes in major accounts
B. Fixed-asset changes
C. Current liabilities
D. Debt covenants / change of control implications
1. Cash Flow Statements:
Provide and discuss the following:
A. Investment needs
B. Financing needs
C. Capital expenditures requirements
D. Planned depreciation and amortization schedules
E. Book and tax lives of assets
F. Net cash-generating capacity
5. Funding:
A. Provide a listing of derivatives, by counter-party, and a copy of the contract of each agreement.
• Interest rate swaps
• Currency swaps
• Caps
• Floors
• Collars
• Other soptions
6. Financial Reporting Organization:
A. Staffing
B. Organization
C. Data processing facilities
• Host systems
• LAN systems
• Software
• Sales support systems
• Order entry systems
D. Financial reporting structure (collection and dissemination of data) E. Government account procedures, if applicable F. Audit staffing (internal and external) G. Accounting controls H. Cash management system
IV. Human Resources
1.-General:
A. Resumes of management and key technical personnel
B. Severance policy
С. Organizational charts
D. Organization structure additions/changes required to meet future growth projections
E. Description of current workforce (age, gender, years of service, turnover); persons on leave of absence, maternity, or other «protected status»
F. Number of full time, part time, temporary, contractual, or lease employees
• List of all locations and the number of people in each one, including branch and field offices and personnel
• List of all countries in which the company is currently operating or has an affiliated relationship with
G. Copy of all available job descriptions and data related to job groupings
H. List any ongoing training initiatives and the vendors that supply the training-, indicate if there are copyright agreements
I. Succession plan
J. Board of Directors roles and responsibilities
K. Structure/process which governs any changes in policies and practices
L. Copy of any handbooks/policy manuals pertaining to employment practices
M. Culture/employee survey used? If so, provide most recent results
N. Summary of manpower by discipline, education, salary distribution, length of service
O. Employee contracts summary and side letter agreements
P. Turnover statistics summary
2. Benefits:
A. Details of all employee plans covering affected employees (explain employee and company contributions):
• Medical
• Dental
• Vision
• Life
• 401K
• Retirement
• Holidays
• Vacation days
• Sick or emergency leave
• College gift matching program
• Merit scholarship program
3. Retirement Plans:
A. Copy of plan booklets and other communications to employees
B. Copy of plan and trust documents including all amendments and board resolutions
C. Copy of most recent IRS determination letter
D. Copy of IRS form 5500 for most recent 5 years (including schedule В attachment and plan financial statements certified by accountants)
E. Copy of PBGC premium filings for most recent 5 years
F. Copy of any applicable insurance contract s) and latest insurance company report(s)
G. Copy of actuarial reports for most recent 5 years
H. Pension footnote disclosure for most recent 5 years ^
I. Listing of plan participants and, if available, employees not participating. Employees sorted by classes of employees (salaried, hourly, commissioned, salesmen, deferred vested terminees, retirees)
J. A statement identifying any outstanding requests for plan information from participants
K. Accrued benefit information on each employee
L. Indication of who administers plan (e.g.. Consulting firm, bank, or company itself)
M. Representations and warranties regarding (a) actual, anticipated or threatened litigation involving plan; (b) operational compliance with applicable laws, etc.
4. Investment Incentive Plans:
A. Copy of plan booklets and other communications to employees
B. Copy of plan and trust documents including all amendments and board resolutions
C. Copy of most recent IRS determination letter
D. Copy of IRS form 5500 for most recent 5 years (including financial statements certified auditors)
E. Copy of any applicable insurance contracts) and latest insurance company report(s) (e.g., A guaranteed income contract)
F. Report of the investment experience of the trust fund and the administrative costs charged to the fund
G. List of plan participants. Employees sorted by classes of employees (salaried, hourly, commissioned, deferred vested terminees, retirees) H. Most recent contribution allocation run and code information necessary to decipher same
5. Group Benefits:
A. A statement identifying any outstanding requests for plan information from participants B. Account balance information on each employee C. Indication of who administers plans , D. Insurance policies/contracts
• Complete and current copy of all group benefit policies and contracts for administrative service arrangements
• Identification of any benefit changes which have occurred during the most recent 3 years and the effective dates of such changes E. Company costs:
• A current list of monthly premium billing rates for each group benefit plan and copy of latest premium statements, if applicable
• List of premium rates in effect for the past 2 years and effective dates of any changes (increases and decreases)
• List of any overdue premiums relating to grace period under contracts
F. For each group benefit plan, copy of any insurance company renewal reports for the last 3 years. If not available, statement listing total premiums paid, claims paid, reserves, and retentions by year
G. For each group benefit plan, monthly contributions paid by employer and/or employees
H. Copy of plan booklets and other communications to employees
I. Federal government reports:
• Copy of 5500 ‘s for most recent 5 years
• Names and locations of any health maintenance organizations (HMO’s) that provide medical
services to any employees J. Names and addresses of all brokers, consultants, and agents for each group benefit plan
K. Indications of what, if any, post-retirement coverage is provided and how funded or otherwise accounted for (also see retiree medical)
L. Information on any funding vehicles used (e.g., VEBA)
6. Retiree Medical:
A. Copy of plan booklets and other communications of employees
B. List of plan participants including active, disabled and retired
C. Information on plan changes, changes in cost-sharing arrangements (including retiree contributions, deductibles and stop loss), and claims rates for most recent 3 years
D. Recent estimates ofFAS 106 liabilities and expense
A. Non-Qualified Retirement Plans:
A. Copy of booklets and other communications to executives
B. Copy of plan documents
C. Copy of any insurance contracts and reports
D. Information of any funding vehicles (e.g., Rabbi trust)
E. List of plan participants
F. Accrued benefit/account balance information
8. Compensation:
A. Organization charts showing all key exempt positions, by department
B. List of all exempt and non-exempt salaried employees by position, salary grade and range, current salary, and bonus/incentive/commission earnings, including salary and extra compensation history for the last 3 years; summary data for employees earning less than $50,000 per year
C. Copy of all compensation plans, or written summaries of them, including administrative regulations
D. Assessment of compensation position versus market (base and total earnings analysis); provide supporting data if available
E. Payroll practice & administration; include controls, use of outside bureaus and service agreements with such bureaus
F. Details of working hours including description of practices related to flex-time, overtime policy and payments
G. List of outstanding claims (for example: vacation accruals, sickness)
H. Copy of job evaluation plan, or a summary of how the plan works
I. Copy of all current salary or wage ranges
J. Description of the salary planning/merit budgeting process
K. Copy of salary and/or wage administration guidelines covering salary/wage increase practices
L. Indication of whether or not current descriptions exist for all jobs
M. Copy of deferred compensation arrangements (including information on any funding vehicles such as Rabbi Trust or COLI) and employment and consulting contracts or agreements
N. Guidelines for company car eligibility and use; indication of how many company cars exist
O. Employee loans
• Employee name
• Position
• Data and amount of loan
• Purpose of loan
• Repayment terms
• Current outstanding balance
• Security
P. Company-paid memberships
Q. Description of all equity participation plans including amounts by person. Include options/restricted stock/phantom plans. Describe vesting provisions and accrual methodology/bookings and any recent amendments. Describe any stock purchase plans.
R. Description of executive perquisites
S. Executive physical examination program
T. Salary continuation plan
U. Financial counseling program
V. Any other compensation plans or arrangements, and names of participants
W. Describe compensation practices for the leased employees
X. Describe payroll processes
Y. Any changes pending to compensation practices? If yes, please give details.
Z. Describe practices for expatriate compensation, if applicable. Give relevant detail for any individuals located outside the United States
AA. Describe any plans, contracts, or commitments which would be impacted by a change in ownership
BB. Describe any special severance or parachute plans
9. EEO:
A. Copy of most recent EEO-1 report(s)
B. Brief summary of any pending discrimination or wrongful termination charges or lawsuits
C. Identification of any affirmative action plan audits during prior 10 years (including audits in progress)
10. HR Legal Issues:
A. Copy of all management contracts by person
B. Sample copy of employee offer letters and contracts
C. Copy of all confidentially/non-compete/consulting/recruiting agreements
D. Any document outlining the «rights of workers» (collective agreement, etc.); Description of all associated communication and decision making processes (assessment of current climate)
E. Lists of all persons departing employment within the past 18 months; the rationale and settlement reached, if appropriate
F. Disclosure of any conflict of interest situations (for example: persons owning stock in suppliers or customers)
G. List of any litigation underway related to employment other than EEO
H. Identify and summarize all employment related litigation, including administrative charges, active or occurring within the last 24 months
I. Information pertaining to any open issues on FMLA/ADA/OSHA J. Describe any organizing campaigns or attempts in the last 18 months
11. HR Systems:
A. Description of existing system(s) for maintaining employee data, including software, hardware, outsourced systems and paper systems
12. Policy Manuals:
A. Copy of personnel and procedures manuals
13. Mandatory Employment Costs:
A. The dollar amount of the most recent full year «FICA» withholding tax
B. The dollar amount of the most recent full year federal unemployment insurance tax and an indication of the claims experience for the most recent two years
C. Any other state/local payroll taxes — for the most recent full year
D. The dollar amount of any workers compensation premium or other contribution, preferably for the most recent 3 years, but at least for the most recent year
14. Sourcing of Talent:
A. Describe the process of sourcing candidates for the talent pool
B. How are individuals sourced?
C. How are individuals screened?
D. Describe the interview process/methodology
E. What is the profile of the ‘average’ placement candidate by segment?
F. Describe the turnover within the talent pool
G. Describe the testing and reference checking processes for evaluation of applicants. For testing tools, provide information about validation.
H. Describe your branch structure and sourcing methodology as compared to the benchmark of your competition I. Given your affiliated sourcing mechanisms, describe the current capacity/saturations of the relevant sources
IV. Legal
A. Review all board and shareholder minutes
B. Review the company’s articles of incorporation and bylaws
C. Review all agreements relating to securities of the company, including purchase agreements, stockholders’ agreements, registration rights agreements, voting agreements, rights of first refusal and all other relevant agreements
D. Review key intellectual property agreements and any issues requiring financial quantification
E. Review other intellectual property issues including patents, claims, licenses, trademarks, etc.
F. Review any security filings and compliance requirements
G. Review tax filings and compliance requirements
H. Review outsourcing contracts and agreements
I. Review customer related contracts, agreements, bids, GSA, warranties, service contracts, etc.
J. Review export related requirements
K. Review government related agreements including grant assistance
L. Review all government investigations
M. Review all litigation
VI. Technology
1. Systems:
A. Review current IS environment including hardware, software, networking and telecommunications
B. Review IS planning process, project and project capital requirements
C. Review long-term IS strategy
D. Review procedures for Y2K compliance
2. Environment Questions
A. What environment is the solution hosted on?
B. What is the underlying database used in production?
C. How do you manage redundancy?
D. How do you manage failures?
E. How do you manage rollbacks?
F. What is your history of failures?
G. How often does the system fail?
H. How much manual intervention is required when the system fails?
I. What does it take, from a resources perspective, to operate this?
J. Is there a separate production and development environment?
K. Development effort to maintain the current system?
V’ Where is the current system in development right now?
M. What is the maintenance effort for the current system?
N. Project management in place?
O. What is the process for managing change?
P. When is the next redesign scheduled for?
Q. How do you measure customer satisfaction?
R. What tools do you have in place to measure customer sat?
S. What tools do you have in place to measure performance and throughput?
T. Will this scale to support the number of hits and potential user base Gateway brings?
U. What is the discipline you use to manage development?
3. GUI
A. How do you generate HTML?
B. What is the browser standard you designed to (IE or Navigator)?
C. How do you maintain session and state? (Cookies or Hidden Fields)
4. Architecture
A. What are the components of your architecture?
B. Do an architectural walkthrough
C. What was your capital plan for 1999?
D. What is the capital plan for 2000 IT to get the business to $ ?
E. What do you anticipate the needs if growth is to get to $1 billion?
5. Scalability
A. What is your capacity model?
B. How do you gage capacity?
C. What metrics do you use to gage capacity and growth?
D. What measures are you using/developing for future scalability?
E. What is the measured throughput of the environment?
F. How many transactions occur daily? Weekly? Monthly?
G. What are the volumes? Volumes? Volumes?
H. When are the heaviest volumes?
I. How many hits to the web site are measured?
6. Data Management
A. How is information, at the catalog level, stored?
B. How are items selected from the catalog?
C. How is information in me catalog maintained?
D. How do you add items?
E. How do you remove items?
E. How to you change prices on an item?
G. Do you have an underlying data model?
7. Security
A. What are the categories of users in the system?
B. Who has authorization to make changes?
C. What information is tracked on the visitor to the site?
D. What is the secured transaction method?
8. Development Environment
A. Tools used to develop the solution?
B. Tools used to test the solution?
C. Formal methodology used to develop system?
D. What were the system development plans for 1998?
E. Did you meet those objectives?
F. Where did you miss?
G. How did you accommodate gaps in development? ,
H. How did the business view on time delivery? Acceptable? Excellent?
I. What functions were not completed as a result of the effort?
J. Formal documentation of system requirements?
K. Were contractors used to build the system?
L. How many developers do you have?
M. What are their skills inventory?
N. How many testers do you have?
O. What third party software is used in the application?
P. Are their existing licensing agreements for third party software?
9. Site Information Management
A. Does the environment support change detection notification?
B. How is the information collected?
C. Where is the information stored?
D. How is this information used?
E. Do you bill for advertising?
F. Ever used hyperlinks to other sites?
10. Integration
A. What back end systems do you currently integrate with?
B. Do you have an established API for integration with other backend systems?
C. Does your API enable extensibility? Support for information we need that they don’t deliver or they need that we don’t deliver.
D. Is customer information stored in a standard format for sharing?
11. Infrastructure
A. What type of environment is this run on? Windows NT or UNIX
B. What types of Network Cards? Intel Pros?
C. What type of router are you running?
D. What type of messaging system are you running, if any?
E. Single name in the DNS address with multiple IP addresses?
F. What is the amount of database processing do you have?
G. How is the infrastructure organized? Web servers to data servers?
H. Use FCAL — Fiber Channel Loop?
