Due Diligence list of questions ...
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.