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Due Diligence list of questions ...

11th Jun 2014
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As promised under my comment re buying an accountancy business - see this link...

Here is the list of Due Diligence questions I was given by Nicola Draper of DraperHinks when I was in the process of trying to purchase another accounting firm.

Things to cover when doing due diligence

  • The vendor needs to prepare a full client listing showing client and age profile, type of work undertaken, fee and when work carried out.
  • How does the vendor bill the clients – when work is done or at a set time each year?
  • Does the vendor have any clients on standing order or direct debit? Where in the payment cycle is each of the clients?
  • Which clients have not paid and what procedure does the vendor have for collecting debts?
  • Does the vendor offer any additional services to the clients such as a Tax Investigations Service whereby they pay a subscription?
  • What computer systems are used by the vendor – are the computer systems in the sale and is there a contract on them that will need to be transferred?
  • Does the vendor have any other on-going contracts ie phone systems that need to be taken over?
  • Does the vendor have the same charge out rates for each client?
  • Are there any special arrangements with any clients?
  • Do the clients bring their records to the vendor’s office or are they picked up?
  • Is there any offsite work?
  • How will the clients be informed of the sale?
  • Clawback – details?
  • What is the lease on the office, who is the landlord, is there a break clause?
  • If the office is owned by the vendor - is it for sale, how much, how recent up to date is the last valuation?
  • Upon completion, how will files be transferred from seller to buyer?
  • Who will be the client point of contact post sale in the new firm? How will the buyer and the seller deal with the handover?
  • Which clients will need a personal introduction?
  • Who will go out with the vendor to meet the clients?
  • How are the clients normally contacted and do they like regular contact?
  • The vendor needs to have PI run off and proof that it is in place.
  • The purchaser should see a number of client files – choose them on a random basis usually between ten and a dozen.
  • Are there any HMRC enquiries?
  • Are there any on-going issues with clients?
  • What are the intentions for the Debtors?
  • What are the intentions for WIP?
  • Has the vendor had any QAD visits and if so what was the outcome?
  • What are the arrangements for archive and current file storage and will these be transferred to the purchaser?
  • Agree the time scale for completion and work towards it.
  • Review all employee and sub contractor files.
  • Check payroll and VAT for last couple of years.
  • Make sure any staff are treated properly under TUPE rules.
  • Take legal advice on staff issues.
  • Check PI and general insurance file.
  • Check fee notes and purchase invoices.
  • Vendor to check the buyer has the funds to buy.
  • Buyer to prove to the vendor they have the funds to buy.
  • Confirm format of the deal and how the money will be paid.
  • Keep Nicola in the loop by copying her in on all emails.
  • The purchaser puts the contract together for the vendor to review.
  • Agree all items before contacting a solicitor.

NB : When the vendor has staff, it is common practice for the buyer to meet key staff prior to the contract being signed.


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By Moonbeam
27th Dec 2018 19:51

This is really good stuff. I wonder how many of those saying they want to sell have got all this data in place. Very few, I'll bet.
There was a series of really good posts a few years ago on Aweb from people who'd spent lots of time examining possible businesses to buy, but who'd given up in despair when they saw the working papers/lack thereof.

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