Due Diligence Checklist For Evaluating A Service Business for Acquisition

We did some work recently advising a client on  a possible acquisition a small service business and came up with a checklist of items to review:

• key employees – plan for retention and role in merged entity
• financials
  • check register – all checks in last two years
  • bank statements
  • income sheet and balance statement
• contracts
  • existing customer contracts  terms and expiration
  • leases and other supplier contracts and obligations
• sales pipeline and forecast
• existing Sales Tools
  • proposals
  • statements of work
  • RFP responses
  • demo examples and scripts
• customer satisfaction (interview to determine)
  • current level of satisfaction with offerings and relationship
  • what needs to be improved
  • what will be required to secure contract renewals

Key risk reducing aspects of a deal

• Your team has relevant and deep domain knowledge
• Your team can sell and manage projects in the areas the firm operates in
• You know one or more people who can vouch for the character of the executives
• You have a plan for the future of the business that goes beyond current clients

Here are some other acquisition due diligence lists:

• American Business Masters Due Diligence Checklist 
• Pioneer Business Ventures Master Acquisition Due Diligence Checklist [PDF]
• Accounting Tools Acquisition Analysis Checklist