Mergers and Acquisitions For Dummies (68 page)

Listing of any major customers lost

Listing of open orders and copies of all supply or service agreements

Surveys and market research reports

Schedule of the company's current advertising programs, marketing plans, budgets, and physical marketing materials

Listing of the company's major competitors

Sellers should provide customer data by major product line and by percentage of sales. A customer with sales that represent more than 5 percent of the gross sales should be considered major.

One of the most sensitive bits of information for any company is its customer list. Most companies would give their corporate eyeteeth to learn their competitors' intimate customer details. If you're a business owner, I'm sure I don't have to do much to convince you that your customer list is highly confidential.

Due to the sensitivity surrounding the customer list, I recommend Sellers release customer information on a staggered basis, especially if Buyer is a direct competitor at the beginning of due diligence.

Initially, Seller should provide Buyer with an anonymous list (using a code such as “customer 1,” “customer 2,” and so on). Only if and when Seller believes Buyer will close the deal should Seller release specific customer names. For convenience, that list should match the anonymous list (that is, customer 1 should be the first customer on the list, and so on). Release of the specific names of customers should occur as late as possible in the due diligence session, ideally as close to closing as possible, to minimize any potential problems.

If Buyer is asking to speak with some customers prior to close, Seller should only grant that request as a last and final step before closing. In other words, all other due diligence should be finished and the purchase agreement should be completed.

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.

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: