This article outlines what a due diligence report should cover and what questions need to be answered with mergers and acquisitions. A due diligence report is sent as an internal memo to members of the executive team who are evaluating the transaction and is a requirement for closing the deal.
What are the Sections of a Due Diligence Report?
#1 Corporate Records
State of incorporation and in good standing with the state
Capitalization and authorized and issued shares of stock and seller of each subsidiary
Articles of incorporation and bylaws
Copies of all correspondence with shareholders and obtain a shareholder list
Existence of any warrants, options, or other potentially dilutive securities
#2 Financial Information
Copies of financial statements for the past five years that have been audited, including all notes and management’s discussion and analysis
Copies of correspondence between management and auditors
List of federal and state jurisdictions where the seller has filed taxes for the past 5 years
Federal, state, and local tax returns for the past 5 years
Thank you for reading this guide to due diligence reports, what’s included in them, and who makes them. CFI is a global provider of the Financial Modeling & Valuation Analyst (FMVA)™ certification program and several other courses for finance professionals. To help you advance your career, check out the additional resources below:
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