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[Company Name]

Due Diligence Assessment Model: Scorecard


[Date]

Rating summary
Financial performance 9
Brand value 4
Business condition 2
Prospects for the future 1
Customers 4
Competitive environment 4
Human capital 3
Quality of assets 3
Structure of purchase transaction 5
Other risks 4
Total 39

Gray cells will be calculated for you. You do not need to enter anything in them.

Note: The current due diligence ratings use a scale of 5 as highest and 1 as lowest. You can change the scale to another one, but make sure that it runs lowest to highest down the list data column.

Financial performance
Due diligence item Due diligence response Rating

The company reported GAAP net income of $20,100 with EBITDA of $28,000. Based on revenue levels, these figures
What is the current year profit (loss)? 3
are acceptable.

What is the previous year profit (loss)? 2

What is the current year revenue? 4

What is the previous year revenue?

What is the current year gross margin?

What is the previous year gross margin?

What is the 3-year revenue growth trend?

What is the industry average growth trend?

What is the revenue breakdown by product / services


category, country and distribution channel?

What is gross margins by products /services?

Where is the most potential for growth? The greatest risk?

What is the profitability and margin comparison versus the


industry?
Wht is the key assumptions for projected sales and operating
cost by segment product?
Discuss the Company’s relationship with its current
accountants as well as any significant findings in prior years
audits ?

Does the company have pricing power? Why or why not?


Brand value
Due diligence item Due diligence response Rating
Can the brand be leveraged to enter new markets or to resist
4
economic downturns?
Are there there intellectual property rights (e.g. Trademarks
etc.) for the domain names and product names?

Provide an overview of the Company’s marketing efforts?

Are a formal custodianship and an organization established to


protect the brand?

Can the brand be marketed globally?

Business condition
Due diligence item Due diligence response Rating
What is the current cost of entry into the industry? Is this cost
2
rising or falling, and why?
Does the need for expensive fixed assets or other large capital
expenditures limit our ability to compete?

Are inventory and equipment a large part of value?

If the business is service oriented, can it hold on to key talent?


Why or why not?
What does the Company perceive to be the major
opportunities and threats for its business? Is this consistent
with competitors’ views?
Describe hat the Company considers to be its key strength
and weaknesses? How does it address its weaknesses?

Is there a strong culture?

Prospects for the future


Due diligence item Due diligence response Rating

What is the industry outlook? 1

Are the products or services differentiating enough?

Will the products or services soon be outmoded?

Has the company grown organically or by acquisitions


historically? Can you continue with this growth strategy and
can you do it better?
If applicable, is the research and development program
adequately funded?
Is international competition emerging, or is it a current factor
within the industry?
What is the company's reliance on the overall economic
conditions?
Customers
Due diligence item Due diligence response Rating
Describe the Company’s customer contracts? Average size,
4
after sales and service contracts characteristics, etc.
Describe revenue per customer, how dependent is the
company on few customers?
Has the company experienced a significant change in turnover
among its important customers in recent years?

Is the company good at acquiring new customers?

Competitive environment
Due diligence item Due diligence response Rating

How many direct and indirect competitors are there? 4

What is the company's relative standing against its direct


competition?

What is the company's strategy versus its competition?

Provide a detailed description of the Company’s key


competitive advantages versus existing and emerging
competitors?

Are there specific costs, processes, or technologies that limit


competitive entry into the market?
Human capital
Due diligence item Due diligence response Rating

Do the company's products or services require special skills,


3
education, or licensing?

Is the work desirable within the job community?

Are the environment and the culture considered suitable to the


job community?

How does the compensation rank versus industry averages?

Are there a clear division of responsibilities between the senoir


management and the Board of Directors?
Are there a clear organization structure chart in the company
which all staff are aware of?
Do all staff have a role description including main
responsibilities, tasks and goals?
Is there a human resources strategy that promotes employee
development?
Are basic human resource compliance requirements met? If
not, do the exceptions pose material legal risk?

Quality of assets
Due diligence item Due diligence response Rating
Real estate: Are the location and the facilities suitable for the
3
business?
Machinery and equipment: What are the costs for repairs?
What are the costs for deferred purchases? What are the
costs for new investments short term?

Structure of purchase transaction


Due diligence item Due diligence response Rating

Will the purchase of the company be highly leveraged? 5

What liabilities need to be assumed?

Is the company safely capitalized in its current condition?

How do cash flow ratios stack up against the industry and


competitors?

Other risks
Due diligence item Due diligence response Rating

Is the labor unionized? 4


Would critical staff remain if the company is sold?

Are there any risks involved in assets or companies recently


acquired by the company?
What are the financial liabilities and guarantees (including
terms of any lease, mortgages, third party debt and
intercompany loans)?

What is the general health of key personnel?

Are there any recent casualty losses and to which extent are
they covered by insurance?
Are heavy government regulations prevalent in the industry, or
is there potential for such regulation?
Are there any current or pending material litigation, including
employees, customers, suppliers, government –related etc.?
Are operations unusually susceptible to weather, political
events, or other generally uncontrollable events?
Due Diligence Analysis Chart

Other risks

Structure of purchase transaction

Quality of assets

Human capital

Competitive environment

Customers

Prospects for the future

Business condition

Brand value

Financial performance

0 1 2 3 4 5 6 7 8 9

Rating
6 7 8 9
[Company Name]

Due Diligence Document List

[Date]

Document list Reviewed Date reviewed Notes

Financial documentation
Formal business plan exists; includes financials, strategic direction, and resource
Current annual business plan Yes 06/16/04
requirements for year

5 years of audited financial statements

3 years of federal and state tax returns

6 months of bank account history

Insurance policies

Liability

Workers' compensation

Life insurance on key personnel

Health coverage

Documentation of recent claims

Other

Legal documentation

Articles of incorporation

Amendments to articles

Bylaws

Office leases

Other facilities leases


Equipment leases

Intellectual property

Patents

Trademarks

Copyrights

Trade secrets

Strategic agreements

Agreements with suppliers and vendors

Selling agreements

Special customer agreements

Press releases or news articles regarding

The company

Competitors

Suppliers

The industry

Research

Industry publications

Research reports

Web site references

Consultant documentation

Other

Available competitor information

List of major customers

List of major suppliers and vendors


List of strategic partners and alliances

Personal information about key employees to use for


performing background or credit checks
Signed permission forms to perform background credit
checks

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