Prior to merging your company with another, you will need to conduct what is known as due diligence. The due diligence process will involve your corporate attorney, the management of your company and perhaps outside counsel who specializes in mergers and acquisitions. The purpose of due diligence is to gather all of relevant information about the other company so that you are able to craft the best possible deal for your company.
Instructions
1. Create a chart detailing the structure of the other company that is a party to the merger. Include any subsidiary businesses the company owns and indicate how they are related to the merger.
2. Compile a list of permits or licenses required by the other business to operate. Regarding permits, due diligence can save your company from time delays caused by reapplying for permits after the merger.
3. Request access to all of the other company's business and financial records from the past 3 years. Hire a forensic accountant to review these records and give you an analysis of the state of the business prior to deal negotiations.
4. Conduct a review existing labor and supply contracts the other business has with third parties. Decide whether or not you would like to continue these contracts after the merger, and then ask your attorney to review the contracts to see if this is possible.
5. Request copies of any and all litigation the company has been a party to in the last 5 years. Ask your attorney to review these documents to see if you will be exposed to liability arising from conduct that occurred prior to the merger.
6. Compile a list of the other party's real estate and personal (corporate) property holdings. Hire a title company to research the titles of all real estate holdings to ensure that ownership can pass to you cleanly after the merger.
7. Request a complete list of the other company's intellectual property holdings. Intellectual property holdings include patents, copyrights and trademarks. The value of each piece of intellectual property can be a major factor when negotiating the costs of the merger.
8. Ask for copies of the other company's federal, state and local tax returns for the past 5 fiscal years. Submit these forms to your forensic accountant so that she can provide you with a report on the state of the company's tax liabilities.
9. Request copies of any and all liens, easements, encumbrances or other barriers to the full and unrestricted use of any accounts or property to be handed over after the merger.
