Mergers and Acquisitions For Dummies (71 page)

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

Debt and financial dealings

A wise Buyer needs to fully understand the Seller's financial dealings for two basic reasons. First, Buyer wants to know what she's getting herself into. In other words, are any hidden or unforeseen problems with a creditor on the horizon? Second, she wants to understand the company's ability to garner financing. Required information may include

The rundown of all promissory notes, commercial paper, loan or credit agreements, letters of credit, and financial surety/performance bonds or similar credit support devices

Listing of all security agreements, pledge agreements, mortgages, and other agreements where another company has a claim to Seller's assets

Listing of any compliance certificates, including borrowing base certificates and covenant compliance calculations

Schedule and details of any existing defaults under credit arrangements and any events that, with the giving of notice or the passage of time, will become such a default

Buyers should retain a capable and experienced accounting and auditing firm to conduct a thorough investigation of Seller's financial dealings.

Environmental concerns

Environmental concerns are an increasingly important part of due diligence. A consulting firm or other business service company probably doesn't have an environmental issue. Important environmental due diligence info may include the following:

Copies of any environmental reviews or inspection reports relating to any of the company's owned or leased properties

Copies of any notices, complaints, suits, or similar documents sent to, received by, or served upon the company by the U.S. Environmental Protection Agency or other local or state regulatory body

Copies of outside reports concerning compliance with waste disposal regulations (hazardous or otherwise)

Listing of hazardous substances, including (but not limited to) asbestos, PCBs (polychlorinated biphenyl), petroleum products, herbicides, pesticides, or radioactive materials used in the company's operations