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10 Things You Need to Take into Account When Doing Due Diligence

It is important that all investors and acquirers of small to medium/large businesses conduct proper due diligence prior to advancing funds or committing to make investments.  Due diligence reviews are critical.  We have always recommended that a qualified independent professional be engaged to conduct due diligence, separate and apart from any salesperson involved.   Below, we have outlined the preliminary documents, questions and issues that you must review with the target company (the “Company”) prior to discussing the investment or project with your lawyer or accountant.  Please note that further research and investigation, beyond the 10 items listed below, is required.




  1. Obtain a current business plan (3-5 year) and a current marketing/sales plan;


  1. Do searches of the Company and its directors at the Court Registry, Land Title Office, Corporate Registry and all relevant government bodies;


  1. Obtain four complete sets of all standard marketing materials that are currently used. For example: product brochures, testimonials, information sheets, slide presentations, electronic presentations, videos, demos, etc.;


  1. Obtain audited Consolidated Financial Statements for the last five years, including the Management Discussion and Analysis (the “MD&A”) that accompanied each year’s performance, as presented to the board of directors and company. The MD&A should discuss each year’s actual performance to budget and should provide particular focus on occurrences outside the normal course of business, trends that have been experienced in the business and industry, margins by product, sales force productivity, and timing of new production introductions;


  1. Obtain the quarterly financial statement for the previous eight years, including the MD&A that accompanied each quarter’s performance as presented to the board of directors of the Company the MD&A should discuss each quarter’s actual performance to budget;


  1. Obtain Forecast Financial Statements for the next three years, including, specifically, the next eight quarters. Forecasts should include income statements, balance sheets and statements of changes in financial position.  This forecast should have two versions:  (1) a version assuming the completion of the contemplated financing, and (ii) a version assuming no financing is completed;


  1. Ask that the Company provide any recent, or relevant, internal or third party studies or research that they may have on the industry in which the Company operates and the markets for the Company’s products. Are you aware of any other studies or research that you should seek to obtain for your due diligence?


  1. Contact certain external parties to discuss their experience with the Company. Ask that they provide a contact names and telephone numbers for the following:
    1. Auditors
    2. Bankers
    3. Five of the most significant customers
    4. Significant suppliers
    5. Companies/firms with whom they have significant strategic relationships


  1. Describe the Company’s products or services in detail. Have the Company consider how the Company distinguishes its products or services from that of its competitors?  Do research.


  1. You will need to interview the senior management personnel of the Company. Each interview will centre on that individual’s scope or responsibilities within the Company and how he/she contributes to the Company’s success.


Sasha Ramnarine Business LawyerTo learn more regarding this, contact Sasha Ramnarine at or visit


10 Things You Need to Take into Account When Doing Due Diligence


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